Value buying in the wake of steep losses in the previous five days and heightened hopes of long-pending tax reforms finally rolling out also helped the stock indices to surge.
The Cabinet yesterday had cleared the Constitutional Amendment Bill on GST, clearing the way for its introduction in the ongoing session of Parliament.
Stability in Russian currency was also a boost to global markets which in turn helped local bourses, traders said.
The 30-share BSE index resumed with an upwide gap of over 340 points and remained in the positive terrain through the day.
It finally concluded at 27,126.57, showing a rise of 416.44 points 1.56 percent. In the previous five sessions, the barometer had lost 1,120.97 points or 4.03 per cent.
Across-the-board buying saw all 12 sectoral indices closing higher in the range of by 1.09-5.26 per cent, with consumer durable, power, capital goods, realty, bankex, auto and metal taking the lead.
Of 30 Sensex stocks, 27 finished with gains while three others were losers. BHEL at 4.91 per cent was the biggest Sensex gainer, followed by Hindalco 4.31 at per cent, Gail India 4.19 per cent, Maruti Suzuki 3.91 per cent, NTPC 3.83 per cent, ICICI Bank 3.82 per cent.
"Indian markets bounced back strongly helped by US markets which ended sharply up yesterday after dovish comments from the Fed and a rise in crude prices on fall in inventory data," said Sanjeev Zarbade, Vice President, Private Client Group Research, Kotak Securities.
Fed Chair Janet Yellen said Fed is unlikely to start its rate hike process for "at least the next couple of meetings." Federal Reserve retained the phrase "considerable time" in its policy statement and also introduced another word "patient", he added.