The BSE Sensex rose 0.8 percent on Thursday to its highest close in nearly three months after strong manufacturing data in India and other major economies from China to Germany eased growth concerns and bolstered risk appetite.

Telecom stocks were in the spotlight through most of the session after the Supreme Court revoked all 122 telecoms licences issued under a scandal-tainted 2008 sale and plunged the telecoms market of Asia's third-largest economy into uncertainty.

Largest operator Bharti Airtel (BRTI.NS) jumped 6.8 percent, its biggest percentage gain in almost 19 months, on expectations it would be a beneficiary of the ruling, while Reliance Communications (RLCM.NS) and Unitech (UNTE.NS), the Indian partner of Norway's Telenor (TEL.OL), fell 3.7 percent and 6.9 percent, respectively.

The ruling is positive for the market, in a sense, because the larger, established players are seen benefiting, said Deepak Jasani, head of retail research at HDFC Securities.

Even for the affected companies, some sort of via-media will have to be found. Their investments on rollouts cannot be allowed to go waste.

Analysts said Thursday's court decision may result in short-term uncertainty in the fast-growing Indian telecom market that has already witnessed squeezed margins in the past few years, and push back foreign investment.

The ruling applies to 122 licences held by eight operators but potentially affects less than 5 percent of users in a fiercely competitive market crowded with more than a dozen players.

The 30-share BSE share index closed 131.27 points, or 0.76 percent, higher at 17,431.85 points, its third straight day of gains. It had risen as much as 1.2 percent in trading. Twenty-one of its components ended higher.

Major gainers included auto and software stocks.

The manufacturing data has certainly had a positive impact, but strong liquidity is also a factor, and that is reflected in the FII inflows, said Neeraj Dewan, director at Quantum Securities.

We are not out of the woods yet, but sentiment has definitely changed, he said.

Foreign institutional investors (FIIs) bought shares worth about $2 billion last month, propelling the benchmark index up 11.3 percent -- its best January rise in 18 years. The index had declined nearly 25 percent in 2011.

India's manufacturing sector grew at its fastest pace in eight months in January as factory output surged the most on record on increased domestic and foreign demand, a business survey showed on Wednesday.

Factory activity also rose in China, the United States and Germany in January, smoothing worries over the fallout from Europe's festering debt crisis.

Export-driven software companies rose on hopes that strong manufacturing growth in the key U.S. market may encourage higher technology spending. Tata Consultancy Services (TCS.NS) rose 1.7 percent, Infosys (INFY.NS) gained 0.5 percent, while Wipro (WIPR.NS) jumped 3.5 percent.

Mahindra Satyam (SATY.NS) jumped more than 5 percent after it reported a stronger-than-expected five-fold jump in quarterly net profit, helped by a fall in the value of the rupee. The stock, however, ended lower after late profit-taking.

Automakers rose after better-than-expected sales in January, but gave up most gains after profit-taking late in the session.

Still, carmaker Maruti Suzuki (MRTI.NS) ended 0.2 percent higher, while Mahindra & Mahindra (MAHM.NS) rose 1.7 percent, after the two companies posted robust sales growth in January.

Banking stocks gained on hopes renewed economic growth would boost credit demand, while interest rates that are widely expected to have peaked are likely to ease soon.

Largest private sector lender ICICI Bank (ICBK.NS), which on Tuesday posted better-than-expected profits, rose 1.4 percent, HDFC Bank (HDBK.NS) settled 0.2 percent higher, although State Bank of India (SBI.NS) gave up gains to close 0.2 percent lower.

The 50-share NSE index .NSEI rose 0.7 percent to 5,269.90.

In the broader market, 884 gainers stayed ahead of 660 declines on a heavy volume of about 1,134 million shares.

STOCKS THAT MOVED

* Hexaware Technologies (HEXT.NS) jumped 10.3 percent to 97.15 rupees after the software services company posted a 123 percent jump in third-quarter net profit, and said it expects 2012 revenue to be at least $370 million.

* Hero MotoCorp (HROM.NS) rose 2 percent to 1,970.85 rupees after the company said sales volume rose 11.5 percent to 520,272 two-wheelers in January, topping analyst estimates.

* Energy explorer Cairn India (CAIL.NS) fell 2.3 percent after the company said its chief executive officer has sold more than half his shareholding.

TOP THREE BY VOLUME

* Unitech on 72.5 million shares.

* Reliance Communications on 45.5 million shares.

* Lanco Infratech (LAIN.NS) on 36.8 million shares.