The BSE benchmark Sensex rallied about 265 points to 36,132 in early session Friday as the March derivatives series took off on a strong footing and foreign fund inflows fuelled the uptrend.

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The 30-share Sensex spurted by 264.99 points, or 0.75 per cent, to 36,132.43 in early trade. The gauge had lost over 346 points in the previous three sessions due to geo-political tensions between India and Pakistan.

However, signs of ease in tensions between the two countries since Thursday evening helped in reviving trading sentiments on domestic bourses.

On the macro-economic front, however, traders might take a cautious look at country's economic growth slowing down to a 5-quarter low of 6.6 per cent in October-December period, analysts said.

Economic growth estimate for the current fiscal year ending March 31 has been revised downwards to 7 per cent from the earlier estimate of 7.2 per cent. This is the lowest growth in the last five years.

Overall sentiments meanwhile turned upbeat on chances of de-escalation of tension with Pakistan, brokers said.

Unabated buying by foreign institutional investors (FIIs) also supported, they said.

Reflecting the bullish mood, all sectoral indices of BSE led by metal, bankex and IT were in the positive zone, rising by up to 0.95 per cent.

The NSE Nifty jumped 76.65 points, or 0.71 per cent, to 10,869.15.

Shares of Vedanta Ltd on the top among Sensex components, rising 2.74 per cent, while Yes Bank gained 1.60 per cent.

Other gainers include Tata Motors, Infosys, Hero MotoCorp, NTPC, ICICI Bank, Tata Steel, TCs, Maruti Suzuki, HDFC Bank, Kotak Bank, HUL, HDFC Ltd, Bajaj Finance, SBI, RIL, Coal India, L&T and ITC Ltd, rising up to 1.18 per cent.

Brokers said investors were busy in creating new positions following the beginning of the March futures and options (F&O) series that led to the rally in the market.

Meanwhile, on a net basis, FIIs bought shares worth Rs 3,210.6 crore, while domestic institutional investors (DIIs) sold shares worth Rs 5,240.62 crore on Thursday, provisional data showed.

A firming trend in the rest of Asia also accelerated buying activities.

Japan's Nikkei quoted 0.89 per cent higher while Hong Kong's Hang Seng gained 0.31 per cent in the early part. China's Shanghai Composite Index too up bhy 0.22 per cent and Straits Times gained 0.40 per cent.

The US Dow Jones ended 0.27 per cent lower on Thursday.