Nifty also reclaimed the 7,700-mark on gains in Reliance Industries and ONGC stocks as crude oil prices recovered from multi-year lows.

Sentiment took a turn for the better after European stocks rose in early trade ahead of the start of a two-day US Federal Reserve meeting, brokers said. Meanwhile, the rupee recovered from 27-month low by rising 16 paise to 66.93 against the dollar.

The 30-share Sensex after resuming higher at 25,186.68, succumbed to profit-booking and slipped into the negative zone to hit a low of 25,075.54. Later it surged to a high of 25,342.78 before settling 170.09 points or 0.68 per cent higher at 25,320.44.

The gauge had gained 106 points in the previous session. The 50-share NSE Nifty closed 50.85 points or 0.66 percent higher at 7,700.90. Intra-day, it hovered between 7,705.00 and 7,625.10.

From Sensex constituents, RIL ended 2.14 percent higher and ONGC rose 2.06 percent, supported by a rebound in global crude oil prices from near 11-year lows. Other gainers included Lupin, HUL, Tata Motors, Bajaj Auto, HDFC, Maruti Suzuki, Hero MotoCorp, Axis Bank, ITC, Bharti Airtel, Infosys, L&T, Sun Pharma and Hindalco.

The broader markets too remained firm as investors indulged in widening bets and the BSE small-cap index rose 0.69 percent and while mid-cap gained 0.56 percent.

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