Shares rebounded on Wednesday after a shaky start to the week, closing 1% higher, as Bajaj Finance and engineering major Larsen & Toubro advanced on better-than-expected earnings, offsetting investor worries ahead of the Federal Reserve's policy decision.
Nifty closed 0.96% higher at 16,641.8, while Sensex rose 0.99% to 55,816.32. The indices have risen over 5% each so far this month as crude prices dropped, easing inflation fears.
The session started on a muted note, following IMF's downgrade of India's growth outlook and as investors braced for the US Federal Reserve to hike rates by 75 basis points.
But a strong advance in European stock markets on a batch of strong results helped boost sentiment.
In Mumbai, non-bank lender Bajaj Finance BJFN.NS climbed 2.1% to its highest in nearly three months after reporting a better-than-expected jump in quarterly profit.
Engineering and construction conglomerate Larsen & Toubro jumped 2.6% to its highest since mid-April after beating profit estimates.
Top carmaker Maruti Suzuki India advanced 1.6% after reporting a rise in profit.
Meanwhile, Nifty Pharma added 2.3% to register its best day since May 20 with Sun Pharma gaining 3%.
Food delivery firm Zomato, which crashed around 22% over the last two sessions, climbed 5.5%.
Department store Shoppers Stop gained 7.9% to its highest in nearly four years after returning to a profit in the June quarter.
Tata Motors closed 0.7% higher ahead of its quarterly results.