The Sensex and Nifty closed over 1% higher in trade today amid gains in banking, auto, consumer durables and NBFC stocks.
While the Sensex rose 461 points or 1.35% to 34,760, Nifty ended 1.54% or 159 points higher at 10,460 level.
Top Sensex gainers were Axis Bank (6.62%), SBI (5.88%) and Maruti (4.77%).
Infosys (2.38%), TCS (2.27%) and Sun Pharma (1.12%) were top Sensex losers.
The BSE midcap index rose 4.23% or 579 points higher to 14,282.
The small cpap index too gained 3.67% or 495 points to 13,997 level.
Banking stocks led the gains with BSE bankex rising 968 points or 3.53% to 28,381 level.
Bank Nifty too closed 794 points or 3.24% higher to 25,321 level.
RBI's decision to inject Rs 12,000 crore liquidity into the system through purchase of government bonds on October 11 to meet the festival season demand for funds pushed banking stocks higher in trade today.
"There has been a considerable meltdown in the past 10-15 days and it's natural to see some bounce after that... There are rumours about NBFC space being addressed.
The news about SBI buying assets may have helped," said Dhananjay Sinha, head-institutional research, Emkay Global Financial Services.
Consumer durables stocks too rose with their BSE index rising 3.77% or 675 points to 18,580 level.
On the other hand, IT stocks closed lower with the BSE IT index falling 1.52% or 230 points to 14,891 level due to a rise in Indian rupee.
Market breadth was positive with 2060 stocks closing higher compared to 606 stocks falling on the BSE.
Global stocks
Global shares were mixed in muted trading on Wednesday amid continuing worries about trade tensions and slowing global economic growth.
France's CAC 40 shed 0.5 percent in early trading to 5,292.91, while Germany's DAX fell nearly 0.3 percent at 11,943.71.
Britain's FTSE 100 edged down nearly 0.2 percent to 7,224.29. US shares were set to drift lower with Dow futures down 0.1 percent at 26,456.
S&P 500 futures were also down 0.1 percent at 2,885.
Japan's benchmark Nikkei 225 added 0.2 percent to finish at 23,506.04, while Australia's S&P/ASX 200 inched up 0.1 percent to 6,049.80. South Korea's Kospi lost 1.1 percent to 2,228.61.
Hong Kong's Hang Seng added 0.2 percent to 26,225.19, while the Shanghai Composite gained nearly 0.2 percent to 2,725.84.
The S&P 500 ended down 4.09 points, or 0.1 percent, at 2,880.34. The Dow Jones industrial average fell 56.21, or 0.2 percent, to 26,430.57, and the Nasdaq composite added 2.07, or less than 0.1 percent, to 7,738.02.