Foreign media cited statements from British Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker according to which the UK and EU have agreed a new withdrawal deal.
Sensex ended 453 points higher at 39,052.06 after it opened marginally higher at 38,647.44 while the broader Nifty ended at 11,586.35, up by 122 points or 1.07 per cent.
Auto stocks gained the most after the Brexit deal. The Nifty auto index surged 3.13 per cent led by Tata Motors, up 13.27 per cent. Motherson Sumi Systems, TVS Motor Company and Eicher Motors were other top auto gainers.
It was the fifth consecutive session of gains for the Nifty as it closed almost at a one month high. The gains came on the back of a boost in sentiments after European Union (EU) and UK negotiators reached a draft agreement on a new Brexit deal.
"The equities with exposure to Europe and UK witnessed a sudden spike in the last 30 minutes after the European Union and U.K. reached a historic Brexit deal, paving the way for Britain's departure from the European Union," Deepak Jasani of HDFC Securities said.
Jasani further said that the stressed financials saw some aggressive bottom fishing while select PSU and metal stocks also witnessed buying interest.
However, analysts said that the breakthrough must still be accepted by EU leaders and then approved by the British Parliament, but it was enough to help investors shrug off mixed earnings from major European companies.
( With inputs from IANS )