Stocks staged a smart recovery on reports that the Omicron strain may not be as dangerous as the other variants. Reflecting the relief rally, the benchmark Sensex surged by almost 887 points while the broader Nifty gained 264.45 points to close above the 17000 mark at 17176.70.

Shares had come under intense pressure in recent sessions over fears that the new Covid-19 variant, which is said to be more transmissible, could adversely affect the global economic recovery.

It came on top of other challenges such as continued selling by foreign portfolio investors (FPIs) because of expensive valuations, and rising inflation in many of the global economies leading to apprehensions that central banks like the US Federal Reserve may raise interest rates sooner than expected.

Back home, the Reserve Bank of India (RBI) will announce its monetary policy on Wednesday.

Though the central bank is expected to retain its accommodative stance and go for a status-quo on the policy for the ninth consecutive time, some economists are not ruling out the possibility of a small hike in the reverse repo that could ultimately lead to an increase in the policy repo rate sometime in 2022.

The global sentiment was also supportive for a rally on Tuesday with almost all of the key indices across Asia and Europe trading in the green. This saw the Sensex opening in the positive zone at 57125.98, following which it hit an intra-day high of 57905.63. The index later ended at 57633.65 — a gain of 886.51 points or 1.56 per cent.

Barring Asian Paints all the stocks in the Sensex pack ended higher.

Tata Steel led the list as it rose by 3.63 per cent. It was followed by Axis Bank, ICICI Bank, Kotak Mahindra Bank, Titan and Bajaj Finance which gained up to 3.60 per cent.

There was good news in the broader markets also with the BSE mid-cap and small-cap indices inching up by 1.29 per cent and 1.14 per cent, respectively.