The Sensex and Nifty closed higher in line with global peers on cues that the global economy was on growth track amid escalation of tariff war between US and China. While the Sensex rose 260 points higher to 35,547, the Nifty rose 61 points to 10,772 level.
Top gainers on the Sensex were Reliance Industries (2.44%), IndusInd Bank (2.27%), and Vedanta Ltd (2.10%).
"Markets are largely driven by global factors due to lesser domestic triggers," said Anita Gandhi, whole-time director at Arihant Capital Markets. "The Reserve Bank of India's OMO (open market operation) purchase should help improve liquidity in the markets and boost sentiment."
Small cap and midcap indices on the BSE rose 0.27% and 0.23%, respectively.
The revival was led by banking stocks with the BSE Bankex rising 1.04% or 306 points to 29,709 level. Bank Nifty too rose 292 points to 26,557 level.
Metal and auto stocks too contributed to the recovery with BSE metal and auto indices rising 1.09% and 0.45%, respectively.
Brokers said investor sentiment got a boost after the Reserve Bank yesterday announced purchase of government securities of up to Rs 10,000 crore on June 21 to help in liquidity management.
Abhijeet Dey, senior fund manager-equities at BNP Paribas Mutual Fund said, "Stock markets shrugged recent weakness to trade on a positive note today. In line with global cues, benchmark indices in India opened the day in the green and traded with strength, through the day. Recovery in global stocks boosted sentiment on the domestic bourses while bargain hunting at lower levels provided some stability to markets. Both the benchmark Sensex and the Nifty finally closed the day with gains of 0.50%. On the sectoral front, barring the IT and FMCG indices, all other indices on the National Stock Exchange (NSE) traded with gains."
Meanwhile, the IndiGo stock was the top BSE loser after a media report said enforcement directorate had summoned top management of the airline in connection with an alleged case of FEMA violations. The stock closed 7.49% or 92 points lower at 1136.15 level on BSE.
Market breadth was marginally negative with 1,309 stocks closing higher against 1314 ending lower on the BSE.
On Tuesday, the Sensex and Nifty closed lower for the second straight day, tracking a sell-off across global markets after the US and China reignited their trade dispute. The BSE Sensex plunged around 262 points to end at a two-week low of 35,286.74, while the broader Nifty dropped 89 points to 10,710.45. This was the index's lowest closing since June 6, when it had ended at 35,178.
Global markets
European shares rose in early trading. Germany's DAX rose 0.4 percent to 12,727.61 and France's CAC 40 added 0.3 percent to 5,405.57. Britain's FTSE 100 gained 1.2 percent to 7,695.94. Wall Street was poised to open higher. Dow futures added 0.4 percent to 24,808.00 and broader S&P 500 futures were up 0.3 percent to 2,773.00.
Japan's benchmark Nikkei 225 index rebounded 1.2 percent to close at 22,555.43 and South Korea's Kospi gained 1.0 percent to 2,363.91. Hong Kong's Hang Seng rose 0.8 percent to 29,696.17 and the Shanghai Composite in mainland China increased 0.3 percent to 2,915.73. Australia's S&P/ASX 200 climbed 1.2 percent to 6,172.60. Taiwan's benchmark rose, but Southeast Asian indexes were mixed.
Positive global cues
German Chancellor Angela Merkel and French President Emmanuel Macron have agreed to create a Eurozone budget ahead of next week's European Union summit. The new budget aims to boost investment and provide a safety mechanism for the 19 nations using the euro currency. It also hopes to find a European solution for migration issues - the center of a dispute between Merkel and her Bavarian allies.
The solid US job market has helped to boost demand for new homes. The Commerce Department said housing starts rose to a seasonally adjusted annual rate of 1.35 million in May, the strongest pace since July 2007. All of May's construction gains came from a 62 percent jump in the Midwest, while building slumped in the Northeast, South and West.