Snapping its two-day losing streak, the BSE benchmark sensex closed nearly 111 points higher at 17,207.29 mainly on heavy buying in IT stocks triggered by TCS's upbeat 2012-13 outlook.
Sensex resumed higher at 17,154.75 and shot up further before ending the day at 17,207.29, showing a rise of 110.61 points or 0.65% from its last close.
The benchmark had dropped by 407.03 points or 2.33% in the last two sessions.
Market players said TCS' impressive outlook for the current fiscal provided the much-needed impetus to the market.
Led by TCS that gained 12.84%, BSE IT index closed nearly 5% higher. TCS contributed nearly over 95 points to the surge in sensex.
Inventure Growth & Securities, Head Research, Milan Bavishi said gains in Sensex were largely driven by IT stocks which jumped up strongly after TCS showed confidence in their growth prospects for FY13.
Market experts also said positive global cues helped the Sensex notch up smart gains.
"Sensex inched up into green in the afternoon session and extended its gain on positive openings in the European markets," said Bonanza Portfolio, Research Analyst, Shanu Goel.
Other major IT stocks Wipro and Infosys closed up in the 2-4% range. Other gainers from the Sensex pack were Tata Power (2.54 pc), Hero Motocorp (2.30 pc), Infosys (1.58 pc), Hindalco (1.39 pc), Tata Steel (1.24 pc) and Sterlite (1 pc).
The NSE 50-share Nifty also rose by 22.05 points or 0.42% to finish at 5,222.65. Meanwhile, the rupee clung to around three and half month lows against the dollar on continued doubts about India's economic fundamentals and possible speculative dollar buying.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
Marketmen also attributed the rise in stocks to a firming trend in global equity markets before reports on American consumer confidence and home sales.
Asian markets ended mostly higher amid volatility as key benchmark indices in China, Hong Kong, Singapore and Taiwan rose by between 0.01% to 0.41% while indices in Japan and South Korea were down by between 0.47% to 0.78%.
European stocks edged higher in their early trade on bargain hunting after heavy losses in the previous session, although confidence remained fragile due to political tensions in the region and worries about global growth. Key benchmark indices in UK, France and Germany were up by 0.49% to 1.08%.
Out of the 30-share Sensex, 17 counters ended with gains, 12 finished with losses while one scrip remain unchanged.
Major losers include Larsen & Toubro (2.63 pc), Bharti Airtel (2.02 pc), Bajaj Auto (1.54 pc), DLF (1.46 pc), Gail India (1.23 pc) and Jindal Steel (1.05 pc).
Among the sectoral indices, BSE TECk ended 3.34% higher followed by BSE Power and BSE Power indices with gains in the 0.50% range. BSE Capital Goods fell by 1.29%, the biggest loser amongst sectors.
The total market breadth remained negative as 1,395 stocks finished in red while 1,333 stocks ended in green. The total turnover improved to Rs. 2,245.93 crore from Rs. 2,033.13 crore on Monday.