Spurt in auto stocks gave a further fillip to the market mood with the sector index logging a gain of 2.33 per cent.
The benchmark BSE Sensex resumed higher at 26,842.19 and firmed up further to 27,037.95 before closing at 27,010.14, showing a gain of 230.48 points or 0.86 per cent.
Tata Motors was the top index gainer with a surge of 8.06 per cent as its Jaguar Land Rover unit reported a 3 per cent rise in September sales.
Meanwhile, the US Commerce Department yesterday reporting that retail sales inched up by 0.1 per cent in September triggered a massive rally in Asian and European markets as the data reinforced hopes of a Fed rate hike delay.
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"India is experiencing a benefit from the same with strong uptick in Asia and EMs," said Vinod Nair Head-Fundamental Research of Geojit BNP Paribas Financial Services.
As a result, the 50-share NSE Nifty also perked up by 71.60 points or 0.88 per cent to close at 8,179.50.
The 30-share Sensex lost 300 points in last three days on disappointing second quarter earnings numbers of technology companies including TCS and Infosys.
The bearish mood turned for the better today on buying in auto, refinery, metal, capital goods and power sector stocks.
Major BSE gainers included BHEL 3.02 per cent, Tata Steel 2.94 per cent, GAIL 2.16 per cent, Coal India 2.14 per cent, ONGC 2.04 per cent, SBI 1.92 per cent and Lupin 1.84 per cent.
Chinese stocks led gains in Asian markets amid fresh signs of reform for their state-owned firms. Indices like China, Hong Kong, Japan, Singapore, South Korea and Taiwan rose in the range 0.93 per cent to 2.32 per cent.
European stocks were also higher as expectations build that the Federal Reserve will delay raising interest rates. Key indices like France, Germany and the UK firmed up between 0.96 per cent to 1.37 per cent.