Sensex gained 185 points on the back of positive international trend even as the Reserve Bank of India held the key bank rates unchanged in its policy review on Tuesday.
The benchmark index opened on a positive note 25818 against the previous close of 25723. It made a high of 25928 and low of 25562 before closing at 25908.
Turnover on BSE was higher at Rs 2,991 crore against Rs 2,431 crore on Monday.
In NSE, Nifty was up 63 points at 7,747.
Stocks in interest rate sensitive sectors such as banking, realty and auto gained after the RBI kept policy rates and cash reserve ratio unchanged while cutting statutory liquidity ratio by 50 basis points.
Slipping into the red for a brief soon after the policy announcement, key indices rebound on sharp buying interest.
While ICICI Bank, IndusInd Bank and Federal Bank were down, HDFC Bank, Axis Bank, Yes Bank and Kotak Mahindra Bank gained marginally.
Among PSU banks, Union Bank of India, Bank of Baroda, Punjab National Bank, Bank of India, IDBI Bank, Canara Bank and State Bank of India gained.
In the second bi-monthly monetary policy statement, RBI chief Raghuram Rajan said obligations put on Indian banks need to be reduced further as they are entering a more competitive environment and the statutory liquidity ratio will have to be cut further. Interest rate tools are blunt and the central bank is trying to use other tools, he said.
Major gainers were HDIL (9%), Cummins India (7%), Unitech (6%), Wockhardt (6%), Future Retail (5%), Ultratech Cement (5%), MCX (5%), Coromandel Intl (5%), Financial Tech (5%) and ACC (5%).
Prominent losers were Petronet LNG (-4%), Crompton Greav (-4%), Tata Comm (-2%), Pipavav Defence (-2%), Cadila Health (-2%), Indian Oil Corp (-2%), Exide Inds (-2%), GMR Infra (-2%) and Piramal Ent (-2%).