Positive global cues, expectations of healthy quarterly results and hopes of a sales boost on the back of the festive season also contributed to the rise of the indices.
Healthy buying was observed in capital goods, oil and gas, IT, FMCG and banking stocks, whereas scrip of consumer durables and metal companies came under heavy selling pressure.
The S&P BSE Sensex closed at 40,051.87, up 220.03 points or 0.55 per cent from the previous close of 39,831.84.
After opening at 40,055.63, the Sensex swayed between an intra-day high of 40,178.12 and a low of 39,805.11.
Similarly, the Nifty50 of the National Stock Exchange closed at 11,844.10, higher by 57.25 points or 0.49 per cent from its previous close.
"Market is positive in expectation of fresh reforms from the government and change in the long-term capital gain tax. After a long-time market is seeing incentive to invest in equity due to reduction in taxation producing better than expected Q2FY20 results, providing a hope that earnings growth will revamp further in H2FY20," said Vinod Nair, Head of Research, Geojit Financial Services.
Results were adding fuel to the market despite weakness in other global markets ahead the US Fed interest rate decision and the US-China trade talks agreement, Nair added.
According to Ajay Menon, Managing Director & CEO - Broking & Distribution, Motilal Oswal Financial Services, sentiment has been boosted on hope of government to cut long-term capital gain tax, dividend distribution tax and the securities transaction tax (STT)."
"Moreover, improved auto sales growth during the festival sessions, good quarterly results and stable oil and the rupee-dollar situation have added fuel to the market. Global markets are witnessing caution ahead of outcome of the Fed policy meeting today (Thursday). Market hopes the Fed to cut interest rate by 25bps," Menon said.
( With inputs from IANS )