The Nifty too climbed 157 points to recapture the 7,900-mark. The comments, which led to a sharp rebound on Wall Street overnight, effectively buoyed investor sentiment here as worries of a China-led market slide took a back seat.
The recovery was supported by gains in blue-chips as consumer durables, realty and healthcare counters shaped up. Covering up of short positions on expiry of August futures and options contracts at the end of session contributed to the upside.
The rupee, at 66.04, was on a firmer footing against dollar, which too rubbed off on investor appetite.
Tracking the bullish cues, the 30-share Sensex hit the day's high of 26,302.77, before closing at 26,231.19, up 516.53, or 2.01 percent, its biggest single-session gain since August 14.
"Markets rallied on the back of short covering on the expiry day of August derivative contracts. Rebound in global markets led by US indices and a strong rupee boosted the Street sentiment," said Gaurav Jain, Director, Hem Securities.
The broader markets, supported by retail investors, gained ground too as BSE small-cap and mid-cap indices surged 2.56 percent and 2.49 percent, respectively.
Asian markets ended mostly in the green with Shanghai Composite rising up to 5.34 percent.



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