Indian stock markets extended gains for the third consecutive session Thursday, as domestic and global developments strengthened the positive sentiment.

The BSE Sensex rose 364 points to close at 24,606 points, while the 50-share Nifty was up 106 points to end at 7,475 points. Overall, the Sensex has gained over 1,500 points in three days.

The rally was mainly led by the growing expectations over an interest rate cut by the Reserve Bank of India (RBI). Some analysts expect the RBI to announce a rate cut as early as this week.

The benchmark indices were also supported by continued gains in Asian stock markets for a third straight session. Global markets were underpinned by positive economic data in the US and a rally in commodity prices.

A recovery in rupee against the dollar also boosted the sentiment. The rupee witnessed gains for the fifth straight session to trade at 67.32 versus the greenback, rebounding from a 30-month low of 68.61 hit earlier this month. The appreciation in rupee was driven by a resumption in foreign inflows into domestic stock markets.

However, the main trigger for a rally in domestic markets is the government's status quo on fiscal consolidation. Presenting his third budget on Monday, Finance Minister Arun Jaitley had kept the fiscal deficit target for the next fiscal year unchanged at 3.5 percent.

"Right now, budget has been positive for sentiment but we need to see how the implementation goes on from here and most importantly we need to see earnings support," Devendra Joshi, Asia equity strategist at HSBC, told NDTV Profit.

"From relative economic growth perspective, India looks better than many of the other emerging markets at this point in time," he said.

While banking stocks continued to post gains, metal stocks surged on the back of a rebound in commodity prices. Stock prices of Tata Steel and Vedanta ended over seven percent higher each. Hindalco shares gained 5.6 percent.

Capital goods shares witnessed heavy buying, with L&T and BHEL shares closing 6.3 percent and 5.9 percent higher, respectively.

Auto stocks also traded higher on the back of strong sales figures for February. Tata Motors shares rose more than 6 percent, while Mahindra & Mahindra closed 1.4 percent higher.