Mumbai: Market on Tuesday shrugged off a widely expected US interest rate hike as the benchmark Sensex bounced 183 points to close at 26,698, with auto, IT, oil and gas shares keeping up the momentum.
At the close, Nifty retook the key 8,200-mark, driven by gains in RIL and ONGC stocks.
Consumer price index-based retail inflation is scheduled for release on Tuesday.
Buying picked up after Asian stocks recovered from early bouts of weakness to end higher ahead of the start of a two-day US Federal Reserve meeting, which is due to start later on Tuesday.
The rate-setting panel is widely expected to hike its key interest rate after a two-day meeting that begins later on Tuesday.
After a positive start, the Sensex hit a low of 26,494.23 as investors locked in gains. It surged to a high of 26,724.97 before settling at 26,697.82, up 182.58 points or 0.69 percent.
The gauge had lost 231.94 points in the previous session.
The 50-share NSE Nifty closed higher by 51 points, or 0.62 percent, at 8,221.80. Intra-day, it hovered between 8,228.85 and 8,155.80.
From Sensex and Nifty constituents, Tata Motors emerged as the top gainer by rising as much as 3.48 percent to close at Rs 470.35 on the BSE on talks of block deals in the counter at an up to 10 percent premium to Monday's close.
Other prominent gainers included Adani Ports, Axis Bank, Wipro, RIL, L&T and Sun Pharma.
In line with the broader trend, shares of state-run oil marketing companies such as BPCL, HPCL and IOC staged a comeback to close higher by up to 2.53 percent after yesterday's steep fall due to a jump in global crude.
Sectorwise, BSE auto index climbed the most by rising 0.98 per cent, followed by IT (0.85 percent) and oil and gas (0.81 percent).
The broader markets, however, suffered as investors booked profit by liquidating their bets. The BSE mid-cap index fell 0.43 percent while mid-cap shed 0.07 percent.
Meanwhile, foreign funds sold shares net worth Rs 94.45 crore yesterday, as per the provisional data.
Overseas, Asian markets ended higher ahead of the US Fed two-day policy meeting while European shares were down in their late morning trade.
In Asia, Japan's Nikkei ended at its highest level for the year by gaining 0.50 percent. Shanghai Composite Index rose 0.07 percent while Hong Kong's Hang Seng was up 0.06 percent.
Indices in Europe such as France, Germany and the UK were quoting lower between 0.07 percent and 0.92 percent.
Back home, of the 30-share Sensex, 21 scrips ended higher.
However, GAIL fell by 1.34 percent followed by Tata Steel 0.79 percent, Lupin 0.71 percent and Hindustan Unilever 0.41 percent.