Mumbai: All-round buying after wholesale inflation declined to a five-month low lifted the benchmark Sensex by nearly 257 points to its highest level since December 9 on hopes the RBI will lower interest rate to boost economic growth.

The NSE barometer Nifty also jumped over 79 points to reclaim the 6,300-point mark as it ended at 6,320.90.

Supported by gains in rate-sensitive banking, realty and auto sector stocks, the 30-share BSE Sensex rallied by a whopping 256.61 points, or 1.22 per cent, to end at 21,289.49, its highest closing since 21,326.42 on December 9.

Overall, 29 out of 30 Sensex-based scrips closed higher.

HDFC and L&T led the gainers, while Tata Steel closed flat.

Other prominent gainers included Tata Motors, Hero MotoCorp, BHEL, Sesa Sterlite and Cipla.

Yesterday, Sensex had lost 101.33 points on profit-taking.

Brokers said along with the rising trend in other Asian and the European markets after the World Bank raised its global growth forecast, wholesale inflation declining to a five-month low of 6.16 per cent in December, raised hopes that the Reserve Bank will ease interest rates and prop up growth.

However, profit-booking by some traders at higher levels, trimmed gains in some stocks, they added.

Shares of state-owned Coal India Ltd ended 1.81 per cent higher after the company declared an interim dividend of Rs 29 per share, or a record 290 per cent, for 2013-14. It had soared over 6 per cent in early trade.

Out of 13 sectoral indices, 10 barometers closed with gains between 0.37 per cent and 1.98 per cent.

The BSE Capital goods sector index rose 1.98 per cent, Banking index by 1.59 per cent, Realty index by 1.31 per cent and Auto index by 1.22 per cent.

Shares of Yes Bank ended 1.95 per cent higher after bank reported 21.4 per cent rise in net profit at 415.6 crore for its third quarter ended December 2013.