IT stocks also supported gains in view of a weak rupee. Global cues also helped as China was buoyed by recent data indicating recovery and reported intervention by Portugal's central bank to rescue crisis-hit Banco Espirito Santo, boosted confidence.

The 30-share barometer, which had lost 606.58 points in the previous two sessions, commenced on a strong footing to touch the day's high of 25,754.42. It settled with a gain of 242.32 points, or 0.95 percent, at 25,723.16. Intra-day, it had fallen to a low of 25,531.38 but recovered smartly.

The 50-share NSE Nifty rose by 81.05 points, or 1.07 per cent, to close the session at 7,683.65 after shuttling between 7,694.80 and 7,622.05 intra-day. It had slipped 189 points in past two days.

Expectations that the Reserve Bank of India (RBI) in its monetary policy review tomorrow will give some relief supported the bullish market sentiment, brokers said. However, consensus is of the view that RBI will not cut rates tomorrow.

Interest-sensitive stocks such as SBI, ICICI Bank, and Axis Bank gained about one per cent ahead of RBI meet outcome.

Shares of Infosys zoomed 3.66 per cent to end the day as the best Sensex gainer. Hindalco spurted 3.12 percent, Sesa Sterlite 2.44 percent, Wipro 2.42 percent, Maruti Suzuki 2.40 percent and Bajaj Auto 1.72 percent. Overall, 25 constituents of the 30-scrip Sensex rose.

The weakness in the rupee, which is trading at over 3-month low at 61.08 (intra-day) against the dollar, helped IT stocks, which get a large chunk of sales in dollars.

Meanwhile, overseas investors pumped in USD 6 billion into the Indian securities market in July taking overall net inflows since beginning of 2014 to over USD 26 billion.

The BSE Consumer Durables index gained the most by rising 3.20 per cent, followed by IT index (2.08 percent), Power index (1.73 percent), Teck index (1.73 percent) and Banking index (0.70 percent).

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