The decision of Moody's Investors Service to raise the outlook to positive from stable for India's `Ba2' rating on foreign and domestic currency debt came as a bonanza and prompted even cautious operators to enter the fray. The S&P CNX Nifty Index of the National Stock Exchange (NSE) too touched an all time-high of 1475.40 points.

Shares commended the rally at start, assuaged byindications that the BJP-led alliance would return to power, dealers said. ``There was some scepticism on Wednesday whether the BJP and its allies could muster even 270 seats earlier but now that they are set to get absolute majority to form a reasonably strong government, the sentiment changed,'' said a dealer with a foreign brokerage.

Foreign investors who were net sellers in the last few days on account of the political uncertainty, made substantial purchases on Thursday. The positive comments of Moody's set the pace for the market rally. Moody's said the new government that emerges from the latest election is likely to stay in office longer than its recent predecessors even though its margin of victory appears to have remained quite small.

With operators making widespread purchases, several securities hit the upward circuit filter -- trading was suspended after the scrips touched the permissible 8 per cent jump in prices. Vasudeo Joshi, director, HSBC Securities said while the rally was expected inthe market after indication of a BJP-led government, Moody's statement further strengthened the market sentiment. Sensex raced past the 4900 level once it was clear that BJP-led alliance would easily be able to form the government at the Centre.

``We expect the new government to be more stable than the previous one as the BJP-led alliance had cemented a pre-poll alliance. Besides the Cabinet is experienced,'' CII president Rahul Bajaj said. This was echoed by other businessmen and market experts. ``With the return of ruling alliance, players are optimistic that pace of economic reforms would be accelerated. Many of the pending bills and reforms should be taken up immediately,'' said Pawan Dharnidharka, broker, BSE.

BSE officials said the 265-point single day gain was also one of the record for the year. Earlier, the BSE witnessed a 239-point gain on June 17, 1998 in a single trading session. Sensex which lost 11.22 points to 4,697.70 on Wednesday could soon touch the 5,000-point mark if the foreign fundsbuying continues, dealers said.

Stock exchanges also witnessed record volumes. The NSE witnessed a record turnover of Rs 4,021 crore while the BSE posted a total turnover Rs 3,101.3 crore. The combined turnover on both the exchanges stood at Rs 7,122 crore.

When Sensex touched the 4985-level in the closing session, domestic institutional investors reportedly made profit-booking selling in some strong scrips. ``This was one reason for Sensex to react at the end. Otherwise, Sensex would have crossed the 5,000 level on Thursday itself,'' said a broker. The entire A group made substantial gains. SBI, TISCO and M&M were in the limelight as FIIs made heavy purchases on these counters.

BSE president Anand Rathi said the time is ripe for PSU disinvestment. ``FIIs are active in Indian markets and the fundamentals of the economy are sound,'' he said. However, a section of marketmen sounded caution on the emerging scenario. ``The Government might introduce tough measures to rein in fiscal deficit. There can alsobe a Kargil tax. The diesel price hike will hurt the industry and push up prices. One should be cautious,'' said a fund manager with UTI.