Mumbai: Bargain hunting bailed out markets today as the Sensex rebounded by almost 122 points, taking comfort from a positive close in Asia despite contagion fears of the Brexit fallout looming large.


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There was large-scale optimism in anticipation of Japan launching a fresh round of economic stimulus to counter the implications of the UK vote to exit the European Union.


Investors still were not in a mood to go the whole hog and kept their portfolios limited ahead of the approaching monthly expiry in the derivatives segment on Thursday.


A higher opening in Europe, the pound sterling firming up for the first time since the Brexit carnage, a stronger rupee against the dollar and signs of stability in commodity prices kept sentiment upbeat.


The benchmark Sensex closed with a gain of 121.59 points, or 0.46 percent, at 26,524.55. The index had gained 5.25 points in yesterday's volatile trade.


Also, the 50-share NSE Nifty regained the key 8,100-mark and settled higher by 33.15 points, or 0.41 percent, at 8,127.85.


Reports of good progress in monsoon rains lifted consumer goods makers such as HUL and ITC that to an extent depend on the rural economy, dealers said. Hindustan Unilever surged 3.25 percent while ITC rose 2.59 percent.


Lupin stayed in the lead with a gain of 4.39 percent, followed by Cipla (1.61 percent), Coal India (1.43 percent), Bharti Airtel (1.35 percent) and Mahindra & Mahindra (1.34 percent).


Out of the 30-share Sensex pack, 19 ended higher.


Tata Communications rose 2.44 percent after the company sold its majority stake in South African Internet-service provider Neotel Pty to telecommunications firm Econet Wireless Global for USD 293 million (about Rs 1,992 crore).


On the sectoral front, FMCG gained the most by rising 1.75 percent, followed by metal, oil & gas and PSU.


Continued buying by retail investors helped small-cap and mid-cap indexes, which moved up 0.79 percent and 0.48 percent, respectively.


Meanwhile, foreign portfolio investors sold shares worth net Rs 146.11 crore yesterday.


Overseas, key indices in France, Germany and the UK rose by 2-2.3 percent.


Asian stocks too ended higher. Japan's Nikkei firmed up 0.09 percent and Shanghai Composite 0.58 percent. 


"Taking cues from European stock markets, Indian markets remained in bullish territory. Volatility in market is expected to continue till F&O expiry on Thursday. Overall, long-term market outlook is largely positive," said Gaurang Shah, Vice-President, Geojit BNP Paribas.


The market breadth remained positive as 1,594 stocks ended in the green, 1,000 closed in the red and 192 ruled steady.


Total turnover fell to Rs 2,635.32 crore, from Rs 3,279.90 crore yesterday.