The broad-based National Stock Exchange index Nifty rose by 32.80 points, or 0.56%, to 5,929.60.
Brokers said banking sector stocks hogged limelight after the banking Bill passed in Parliament on Tuesday, paving way for foreign investments in the sector and establishment of new private banks.
They said a firming global trend as US lawmakers look to be closing in on a deal to avert the fiscal cliff further influenced the trading sentiment.
Shares of non-banking financial companies (NBFC) and banks surged after the Lok Sabha passed a Bill paving way for foreign investments in the sector and establishment of new private banks.
Shares of Edelweiss Financial Services soared,Religare Enterprises, Mahindra and Mahindra Financials, Shriram Transport Finance, IDFC and Larsen and Toubro Finance Holdings recorded handsome gains.
In 30-BSE index components, 23 stocks advanced, while seven closed with losses.