The Sensex ended the day higher by 240 points (provisional), while the Nifty gained 79 points in trade.
WPI Inflation which came in at just 6.16 per cent, as against consensus estimates of 7 per cent, saw sudden buying interest in banking stocks.
The Bank Nifty ended the day with a rally in stocks, particularly from the PSU banking space. Stocks from the banking sector that rallied were Canara Bank, Union Bank, HDFC Bank and Kotak Mahindra Bank.
Coal India rallied sharply in trade after the company declared a hefty dividend of Rs 29 per share. The stock ended the day almost 3 per cent up.
Among the other stars in trade today was Larsen and Toubro which crossed the Rs 1000 mark in trade. ICICI Bank and Reliance Communications were the other gainers.
Jaiprakash Associates was the only stock that remained subdued from the Nifty in trade today. Mid cap stocks, also saw some bit of selling pressure with notable losers being Voltas, Crompton Greaves, CESC and Biocon.
Yes Bank which reported a good set of numbers ended the day higher by 1.6 per cent. The stock has run up sharply on Tuesday as well, on anticipation of better than expected results.
Meanwhile, markets across Asia rallied sharply on the back of strong overseas closings in the US. The Japanese Nikkei saw the largest gain with the index up 2.5 per cent, while other notable gainers were the Straits Times and Taiwan Weighted.