The Sensex and Nifty were trading higher by nearly one per cent due to heavy buying in FMCG, auto, metal and bank stocks amid firm global cues.
At 1.40 p.m., the 30-share BSE index Sensex was up 229.12 points or 0.73 per cent at 31,678.15 and the 50-share NSE index Nifty was up 74.75 points or 0.76 per cent at 9,868.90.
Among BSE sectoral indices, FMCG index gained the most by 2.29 per cent, followed by metal 1.54 per cent, auto 1.3 per cent and banking 0.79 per cent. On the other hand, capital goods index fell 0.31 per cent and infrastructure 0.21 per cent.
Consumer stocks gained as the Nifty FMCG index rose nearly 2 per cent in its biggest intraday percentage gain in over a month, recovering from recent losses sparked by worries about the impact from India's new goods and services tax.
Top five Sensex gainers were ITC (+3.34%), HUL (+2.47%), Tata Motors (+2.2%), Kotak Bank (+1.8%) and Hero MotoCorp (+1.75%), while the major losers were Asian Paints (-1.2%), Coal India (-1.15%), Bharti Airtel (-1.05%), Power Grid (-1.01%) and Dr Reddy's (-0.98%).
Early trade
The benchmark BSE Sensex surged about 154 points and the NSE Nifty reclaimed the 9,800-level in early trade on higher capital inflows by domestic investors. The strong start came in the face of sharp jump in inflation numbers, which were released on Monday.
The 30-share barometer, which had gained 235.44 points in the previous session on Monday,jumped 153.61 points or 0.48 per cent to 31,602.64, with FMCG, auto, power, consumer durables, IT, metal and realty stocks leading the gains. Markets had remained closed yesterday on account of Independence Day.
On similar lines, the NSE Nifty was up by 36.60 points or 0.37 per cent at 9,830.75 points.
Brokers said sentiment remained upbeat on the back of persistent buying by domestic institutional investors (DIIs) even as retail inflation jumped to 2.36 per cent in July.
Wholesale inflation too rose sharply to 1.88 per cent in July — first rise in five months — as some food articles turned dearer even as the industry pitched for cut in interest rates citing weak industrial activity.
Brokers also said a firm trend in other Asian markets as fears receded over a potential clash between the US and North Korea and overnight gains at Wall Street also influenced the trading sentiment here.
US-North Korea tensions
Since hitting an all-time high on August 2, India's broader NSE index has fallen more than 3 per cent on profit-taking as well as a flare-up in tensions between the United States and North Korea.
“There is complete lack of triggers, all the movement has been on geopolitical situation till now,” said Jayant Manglik, president, retail distribution, Religare Securities.
The dollar hoarded hefty gains on Wednesday after strong US retail data put a Federal Reserve rate hike back on the agenda, while Asian stocks inched ahead as tensions in the Korean peninsula simmered down a little.
North Korean leader Kim Jong Un has delayed a decision on firing missiles towards Guam while he waits to see what the United States does, as Washington said any dialogue was up to Kim.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent, while Japan's Nikkei dithered either side of flat.