The Bombay Stock exchange gained 335.29 points to close at 18,183.8 (provisional) points, while the NSE Nifty added 109.45 points to close at 5,525.50.
The Nifty has now closed above 5500 points for the first time since August 2011. Lower inflation data and a stellar financial performance by Tata Motors boosted sentiments further.
The stock of Tata Motors rallied to 287.75, closing 7.39% over Tuesday's close after the company reported a sharp growth of 44% in net profits on the back of growth in volumes, improved product and market mix.
Banking stocks were also in the limelight buoyed by the lower inflation data and the subsequent possibility of a rate cut. Private lenders Axis Bank rose 8.05%, while ICICI Bank rose 3.96 % and HDFC Bank gained 2.91%.
Infrastructure stocks too, gained on hopes of a cut in bank rates. Reliance Power gained a whopping 12.85 %, while Jaiprakash Associates rallied 8%.
Reliance Industries was amongst the few stocks that saw a subdued performance with the stock bucking the buoyant trend and closing lower by 1.23%.
Market men believe share prices will gain further momentum, if the Greek crisis is resolved. A group of EU Ministers meeting to sanction further funds to Greece has now been delayed.