The Sensex, which had lost nearly 321 points in last three sessions, recovered by 207.89, or 1.07% to 19,570.44, snapping a three-day fall.
On similar lines, the broad-based National Stock Exchange index Nifty regained 5,900 level by rising 57.75 points, or 0.99% to end at 5,908.95.
In 30-share Sensex, 24 stocks led by SBI (3.51%), Maruti (3.43%), ICICI Bank (2.29%), HDFC Bank (2.28%) and L&T (1.92%) ended in positive territory. RIL, TCS, HUL and ONGC also notched up smart gains.
While 1,420 stocks rose and 1,446 counters fell in overall BSE platform, investor wealth rose by Rs. 50,000 crore to Rs. 66.94 lakh crore.
Wholesale Price Index (WPI) based inflation rose to 6.84% in February 2013 after falling to a three-year low of 6.62% in the previous month.
However, core inflation - an indicator of demand side pressures on prices - fell below the 4% mark for the first time in the past 35 months.
"This should give the RBI some elbow room to ease rates in the March 19 policy as monetary policy stance has turned more growth-supportive," said Bhupali Gursale, economist, Angel Broking.
Besides, brokers said strong US retail sales data, a higher opening in the European markets and a mixed trend in the Asian region further supported the domestic market.
Sectorally in Indian markets, the BSE banking index gained 2.08% to 13,796.47. The BSE realty sector index ended 2.18% higher at 2,107.61 with stocks of Prestige Estates rising 7.97%, Unitech by 6.09% and DLF Ltd 1.5%.