The Sensex and the Nifty ended higher by nearly 0.9 per cent on increased capital inflows on the last trading session of the Samvat Year 2070, amid the government announcing a slew of economic reforms.
The 30-share BSE index Sensex surged 211.58 points at 26,787.23 and the 50-share NSE index Nifty moved up by 68.15 points at 7,995.90.
Barring PSU, all other BSE sectoral indices ended significantly in the green. Among them, auto, capital goods, healthcare and consumer durables indices were the star-performers and were up 2.97 per cent, 2.08 per cent, 1.67 per cent and 1.16 per cent, respectively.
Hero MotoCorp, Tata Motors, Maruti, Cipla and Bajaj Auto were the top five gainers among 30-share Sensex constituents, while the major losers were ONGC, ITC, Coal India, NTPC and ICICI Bank.
A report by SMC Global said: "Asian and US stocks posted gains as European Central Bank relieved investors by announcing enhanced stimulus to push the European economy from further slowdown. Existing home sales in the US increased by more than anticipated in the month of September bouncing back to their highest level in a year. It climbed 2.4 per cent to a seasonally adjusted annual rate of 5.17 million in September after falling 1.8 per cent to a rate of 5.05 million in August. Economists had expected existing home sales to rise to a rate of 5.10 million. With the bigger than expected rebound, existing home sales rose to their highest annual rate since reaching 5.26 million in September of last year."
European shares reversed early gains and dipped on Wednesday morning, with traders citing worries over potential failures in the European Central Bank's ongoing bank stress tests.
At 0839 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 per cent at 1,293.03 points.
Standard & Poor’s 500 Index futures fell 0.3 per cent, while The MSCI Asia Pacific Index jumped 1.5 per cent.
Traders pointed to a report from Spain's Efe news service which said that at least 11 banks from six European countries are set to fail a region-wide financial health check this weekend.
The euro zone banking index was down 0.6 per cent.
However, traders said losses in the sector were limited by expectations of ECB's action in corporate bond market and hopes that even failures would remove uncertainty.
Sources told Reuters on Tuesday that the ECB is considering buying corporate bonds on the secondary market - a step that would help banks free up more of their balance sheets for lending - and may decide on the matter as soon as December with a view to begin purchases early next year, sparking a rally in European banking shares.
"Reports that the ECB was looking to purchase corporate bonds in the secondary market gave the bulls the green light for a rally," Capital Spreads trader Jonathan Sudaria said in a note.
Asian shares were up, after Wall Street's strong performance on upbeat results from two technology bellwethers offset investors' recent concerns about the outlook for the global economy.
Asian sentiment also got a lift from the European Central Bank's plan to buy corporate bonds, a step that would help banks free up more of their balance sheets for lending. The ECB might decide on the matter as soon as December with a view to begin purchases early next year, several sources familiar with the situation told Reuters.