Furthermore, strengthening rupee, which appreciated by 18 paise to 63.55 (intra-session) against the dollar supported the rally.
The Sensex opened higher and gathered momentum on continued buying to touch high of 27,404.60 but profit-taking at the fag-end trimmed gains.
Rising for the sixth straight session, it finally settled 200.34 points or 0.74 per cent higher at 27,316.17.
On weekly basis, Sensex and Nifty has gone up by 890.83 points and 242.05 points, respectively, snapping their three-week losing streak.
Meanwhile, volumes were well below their 10-day average on the BSE and National Stock Exchange due to heavy rains in Mumbai.
The 50-share Nifty breached the 8,200-mark by surging 50.35 points or 0.62 per cent to close at 8,224.95.
Broader markets also rallied with mid-cap and small-cap indices recording gains of 0.58 per cent and 0.28 per cent, respectively.
Sentiments remained upbeat after the US Federal Reserve left key interest rates unchanged on Wednesday and pledge from chair Janet Yellen that the central bank will only gradually raise interest rates.
Reliance Industries continued its upward journey for the sixth day in a row, breached Rs 1,000-mark, for the first time since November 2014 to touch day’s high of Rs 1,006 and ended 1.78 per cent higher at Rs 996.50.
Other gainers on BSE include, HDFC, ONGC, Hero MotoCorp, Bharti Airtel, HDFC Bank, Vedanta, ITC, TCS, Wipro, SBI, Bajaj Auto, ICICI Bank, Axis Bank, Tata Steel and Hindalco.
Sectorwise, BSE oil&gas gained the most by surging 1.11 per cent, followed by bankex 0.86 per cent, FMCG 0.75 per cent, PSU 0.72 per cent and auto 0.60 per cent.
In overseas markets, Asian markets ended higher and European stocks climbed in their opening trade.
PTI