Strong closing across Asia and higher markets across Europe also led to the sharp rally. Shares of telecom stocks, however, were weak following the Telecom Commission's decision that all spectrum given to operators in the 900-MHz band would be re-farmed to the 1,800-MHz band at the time of renewal of licences, beginning 2014.
Bharti Airtel, Idea Cellular and Reliance Communications all closed the day with losses. Kingfisher Airlines too lost significant ground in trade today as investors remained worried over the extension of lockout at the company.
Software stocks Mphasis fell following reports that the NSE would drop the company from the F&O segment w.e.f. December 28, 2012.
AstraZeneca Pharma which launched its heart drug Brilinta in India gained following the news. Nifty stocks which saw maximum gains in trade were Axis Bank, Jaiprakash Associates, Tata Power and Bank of Baroda.
Meanwhile, shares in Europe were trading higher with the German DAX and the UK's FTSE higher. Markets are expected to continue to trade higher with increased volatility and largely follow global cues.