The BSE Sensex surged over 200 points, while the broader Nifty benchmark edged above the 5,750 mark amid a broad rally on Tuesday. The rupee advanced 20 paise to 54.66 against the dollar.
Markets tracked positive global cues. Overnight, the Dow came within 40 points of an all-time high, while Chinese markets rebounded after a sharp selloff on Monday.
Rate-sensitive shares led the gains on growing hopes that the Reserve Bank will cut interest rates later this month. The BSE Bankex and realty indices were up 1.5 per cent each, while auto stocks advanced 1.7 per cent. All other groups of stocks traded higher.
Private lender ICICI Bank, India's biggest car manufacturer Maruti Suzuki and real estate developer DLF all saw strong buying interest.
Index heavyweights such as Reliance Industries jumped 2.5 per cent.
On the Nifty, 40 shares traded in the green. Tata Motors was the top gainer, up 4 per cent, after its luxury car subsidiary Jaguar Land Rover announced expansion plans.
JLR has ridden a rise in demand for its luxury saloons and SUVs over the past two years, notably in China and other emerging markets.
IT outsourcer HCL Tech and infra major Jaiprakash Associates gained 3-4 per cent.
Among the Nifty losers, mobile carrier Bharti Airtel declined nearly 2 per cent followed by two-wheeler maker Bajaj Auto, which fell 1.35 per cent on weak sales and a downgrade by JPMorgan.
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