Top percentage gainers on the 50-scrip index at the time were Indiabulls Housing Finance, State Bank of India, HDFC, Zee Entertainment, Mahindra and Mahindra and Bajaj Finserv, trading between 2.01 per cent and 3.70 per cent higher. HDFC, HDFC Bank, ICICI Bank and SBI contributed the most to the upmove in Sensex.

Market breadth was positive, with 1,071 stocks trading higher on the BSE and 406 struggling with losses. On the NSE, 1,140 stocks advanced while 434 declined.

Finance Minister Nirmala Sitharaman on Friday announced a slew of measures to revive the economy. The Finance Minister said the government would withdraw higher taxes on foreign portfolio investors, as announced in the Budget, and also withdraw the surcharge on long- and short-term capital gains.

Ms Sitharaman also said the government will provide Rs. 70,000 crore worth of recapitalisation to public sector banks upfront, instead of spreading it throughout the year. (Read more)

Analysts say investors' sentiment is likely to improve over the next couple of weeks. “Specifically, withdrawal of enhanced surcharge levied in July 2019 budget on long- and short-term capital gains, and FNO (futures & options) trades would boost the sentiment heavily in the short term,” said Ashish Nanda, EVP and business head-PCG, commodities and currency business, Kotak Securities.

Some analysts are also of the view that more measures will be needed.

Investment banking firm JM Financial has said that although the government has been responsive to the issues of industry, the steps may not be sufficient and more measures might be needed to give a fresh start to the lending cycle of shadow banks.

“As confidence is returning in the market, we could see buying in select mid-cap companies along with large cap stocks," Mr Nanda added.

Meanwhile, equities in other Asian markets sank as the latest salvo in the US-China trade war shook confidence in the world economy. MSCI's broadest index of Asia-Pacific shares outside Japan still shed 2.0 per cent, and Australia 1.5 per cent. Japan's Nikkei lost 2.3 per cent, while Shanghai blue chips fell 1.2 per cent.