Rising for a second straight session, the benchmark BSE Sensex rose by 402 points on Wednesday to settle at a one-week high of 25,719.58 led by gains in metal, realty and auto stocks on strong rally in global shares.
Sentiment also got a boost after the government approved several reforms, including allowing telecom companies to sell radiowaves to other service providers.
Tracking overnight gains at the Wall Street, Asian cues on Wednesday were largely positive, with markets in China stabilising on hopes of a fresh government stimulus and Japanese stocks posting their biggest one-day gain of 7.71% since the height of the global financial crisis in 2008.
The benchmark index resumed over 365 points higher and gradually moved upwards to hit the day's high of 25,820.56 before closing 401.71 points or 1.59% up at 25,719.58 -- its highest closing since September 3.
The gauge has now surged by 826 points in two sessions. Out of 30-Sensex constituents, 27 ended higher. The 50-issue NSE Nifty reclaimed the 7,800-point mark by surging 130.35 points or 1.70% to close at 7,818.60.
It logged an intra-day high of 7,846.05. The rally was across-the-board with all the BSE sectoral indices led by metal and auto ending in the positive range.
The rupee strengthening by 31 paise to 66.24 against the American currency also helped, traders said. Telecommunications stocks such as Bharti Airtel rose 2.44%, Reliance Communication surged 11.57% and Idea Cellular gained 2.12%.
Hindalco was the top BSE gainer with a rise of 7.97%, followed by Vedanta 6.85%, NTPC 5.50%, Tata Steel 4.57%, Tata Motors 3.98%, Maruti Suzuki 3.81%, RIL 2.84%, Infosys 2.76%, Bajaj Auto 2.68% and Axis Bank 2.60%.
"All the sectors ended in green and the major gainers for the day were metal, auto and realty, which closed up to 3.54% higher," said Delhi-based NSE broker Manoj Choraria.
Meanwhile, foreign investors sold shares worth Rs 659.672 crore on Tuesday, as per provisional data.
European stocks were also higher in their late morning deals, tracking gains in global equities amid optimism that China's market turmoil may be contained.