The S&P BSE Sensex and NSE Nifty 50 indexes surged in the last hour of trade on Thursday, after a report by news agency Reuters cited an official as saying that the government is likely to exempt foreign portfolio investors from higher taxes. The Sensex surged as much as 750 points from the day's lowest level in the last hour of trade and the broader Nifty 50 Index briefly surpassed its important psychological level of 11,050. For most part of the day, Sensex and Nifty traded in a range-bound manner.

The Sensex ended 637 points or 1.74 per cent higher at 37,327 and the NSE Nifty 50 index jumped 1.63 per cent or 177 points to settle at 11,032.

The budget provided for increased personal income taxes on those with annual income of more than Rs 2 crore.

The official, who declined to be named, said the government will either issue a notification or an executive order, which could be later submitted to parliament for approval, to exempt the foreign portfolio investors, mainly registered as trusts, from the increase in surcharge on super rich taxpayers, according to Reuters.

"The markets primarily rose after reports of rollback of higher taxes on foreign portfolio investors surfaced today. The steep correction in Nifty also happened because of announcement of higher taxes on foreign investors in the Budget," Gaurang Shah of Geojit Financial Services told NDTV.

Buying was broad-based in today's session as all the 11 sector gauges compiled by National Stock Exchange ended higher led by the Nifty Auto Index's 3 per cent rally. Banking, financial services, FMCG, information technology, media, metal, pharma, PSU bank and realty sector gauges also rose over a per cent each.

Mid- and small-cap shares also witnessed buying interest as the Nifty Midcap 100 Index rose 0.7 per cent and the Nifty Smallcap 100 index advanced 1 per cent.

HCL Technologies was top gainer in the Nifty 50 basket of shares, the stock rose 6.7 per cent to Rs 1,091 after its revenue in dollar terms grew 3.8 per cent on a quarter-on-quarter basis to $2,364 million. In constant currency terms, HCL Tech said its revenue rose 4.2 per cent compared to the quarter ended March 31.

Tata Motors jumped 6 per cent to close at Rs 124 on the back of heavy volumes. JSW Steel, Reliance Industries, Bharat Petroleum, Bajaj Auto, Mahindra & Mahindra, Hero MotoCorp and Yes Bank also rose between 3 and 5 per cent each.

On the flipside, Tata Steel, Cipla, UltraTech Cement and Indiabulls Housing Finance were among the notable laggards.

The overall breadth favoured buyers as 1,055 shares closed higher while nearly 700 shares closed lower on the NSE.