The IMF forecast on Tuesday lifted both the BSE Sensex and the NSE Nifty to lifetime highs. Improved foreign inflows also led to a surge in share prices.
The BSE Sensex hit a lifetime high of 28,829.29 and Nifty hit an all-time high of 8,707.90.
On January 20, IMF said that India would be world's fastest growing economy in the world and is expected to grow at 6.3 per cent in 2015 and 6.5 per cent in the 2016, by when it is likely to cross China's projected growth rate.
The market also rose after China reported its economy had not slowed as much as many had feared.
China's National Bureau of Statistics said that the economy grew 7.4 per cent last year and 7.3 per cent in the October-December quarter.
China's industrial output rose 7.9 per cent, while China's retail sales jumped 11.9 per cent in December 2014.
This week all eyes will be on the European Central Bank (ECB) meet to consider a quantitative easing (QE) package on Thursday January 22.
In fact, the market has mostly discounted that the ECB will begin its government bonds buying programme to stimulate the European economy.
There are concerns that the eurozone is disintegrating because of the Greek crisis.
On Sunday, January 25, Greece is set to hold snap elections after it failed to elect a new president in a third round of voting late last year.
As far as the Indian market is concerned, it will start building expectations ahead of the Union Budget next month.
The market expects the government to kick-start its reform process, boosting investment in the country.
The market is still not euphoric.
It is fairly valued, say experts, and therefore investors should tread cautiously and not try to time the market.
The past has shown that the Indian market is purely driven by liquidity, especially from FII flows.