Indian shares extended gains to settle over 1% higher on Wednesday as a rally in IT stocks helped overshadow jitters stemming from the rapid spread of a new variant of the coronavirus in the United Kingdom.

The NSE Nifty 50 index ended 1% higher at 13,601.10 and the benchmark S&P BSE Sensex rose 0.95% to 46,444.18.

The Nifty Midcap 100 Index and the Nifty Smallcap 100 Index rallied, adding more than 2% each.

Meanwhile, uncertainty around a U.S. stimulus package and fears of the economic impact of the new variant of the coronavirus weighed on global investor mood. However, European stocks eked out gains on hopes of an imminent Brexit trade deal.

The Nifty IT index closed up 2.36 per cent, scaling a record high for a second straight session.

Infosys Ltd closed up 2.58% after signing a cloud partnership deal with Daimler AG, while Wipro Ltd added 5.7%, following a $700 million strategic agreement with Metro AG. Both stocks closed at record peaks.

"In a market which saw some correction, IT and pharma stocks are coming back in focus. IT is doing well on the (back of) strong deal wins," said Siddhartha Khemka, head of retail research at Motilal Oswal Securities in Mumbai.

"In a short week, we have seen some high volatility due to negative global cues, and we could still see some wild swings."

The Nifty Media index and the Nifty PSU Bank index closed up 3.27% and 2.06%, respectively.

The Nifty Pharma index closed the session 1.61% higher, led by a 4.35% rise in Biocon Ltd.

Reuters on Tuesday reported that India is likely to approve Oxford-AstraZeneca's coronavirus vaccine for emergency use by next week.

Khemka, however, said markets had already factored in the vaccine development news.

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