The benchmark BSE Sensex surged one per cent, recording its highest close in over two weeks, propped by upbeat Asian markets even as the possibility of the US Federal Reserve hiking interest rates for the first time in almost decade loomed.

The 30-share BSE index Sensex ended higher by 258.04 points or 1.00 per cent at 25,963.97 and the 50-share NSE index Nifty ended up by 70.05 points or 0.89 per cent at 7,899.15.

Among BSE sectoral indices, banking index was the star-performer and was up 1.42 per cent, followed by power 0.7 per cent, healthcare 0.67 per cent and TECk 0.56 per cent. On the other hand, consumer durables 1.45 per cent, followed by oil & gas 0.6 per cent, capital goods 0.46 per cent and realty 0.39 per cent.

Top five Sensex gainers were Bharti Airtel (+2.58%), Sun Pharma (+2.38%), Axis Bank (+2.35%), VEDL (+2.12%) and Hero MotoCorp (+2.01%), while the major losers were BHEL (-0.66%), Dr Reddy's (-0.6%), L&T (-0.58%) and Coal India (-0.06%).

Reclaims 26K-mark

The Sensex reclaimed the crucial 26,000-mark by jumping over 300 points, and the NSE Nifty traded above the 7,900-level in the afternoon trade on a flurry of buying by investors amid a firm trend overseas ahead of the Fed’s rate decision this week.

The 30-share index jumped 300.82 points or 1.17 per cent to over two-week high of 26,006.75 in the afternoon trade. Also, the 50-share NSE Nifty recaptured the psychological 7,900-mark by surging 84.80 points or 1.08 per cent to 7,913.90.

The gauge had retreated from a two-week high by losing 150.77 points in the previous trading session.

Fed rate hike

Global investors are divided about the likelihood of a rate increase by the Fed at its two-day meeting starting later in the day, and US economic data published on Tuesday did little to either back, or douse, expectations of one.

"Once this uncertainty is over, markets will take off," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

Indian investors are also hopeful that the Reserve Bank of India would cut interest rates for a fourth time this year at its policy review on September 29, after data earlier this week showed consumer inflation easing to the lowest on record.

Sentiment was upbeat as investors widened bets tracking a firm trend in other Asian bourses, with Shanghai stocks closing up 4.89 per cent, as investors returned to the market amid speculation of state-led buying, brokers said.

Besides, a firm European markets ahead of the crucial two-day US Federal Reserve meet starting today, buoyed the sentiment here, they added.

Global markets

European shares climbed on Wednesday, with miner Glencore and fashion group Inditex outperforming, as the region's stock markets were buoyed by gains overnight on US and Asian equities.

The pan-European FTSEurofirst 300 index advanced by 0.9 per cent while the euro zone's blue-chip Euro STOXX 50 index also rose 1 per cent.

Asian shares followed Wall Street higher on Wednesday, albeit in thin volume, and short-term U.S. bond yields held near 4 1/2-year highs as investors braced for the possibility of the first interest rate hike in the United States in almost a decade.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3 per cent, while Japan's Nikkei gained 1.1 per cent.

Stocks rose sharply on Wall Street and in Europe on Tuesday, supported by growing US retail sales, though caution remained ahead of a possible rate increase by the US central bank later in the week, which would be its first in nearly a decade.

The US dollar index advanced the most in two weeks, while US oil jumped more than 1 per cent despite a burst of selling after the White House said it would not support a Bill to end the 40-year-old ban on crude oil exports.

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