The 30-share index, which fell about 130 points in early trade, staged a strong comeback to regain the crucial 26,000-level by surging 344.62 points, or 1.34 per cent, to 26,023.55 at 1345 hours. The gauge had lost 201.45 points in the previous two sessions.
All sectoral indices led by metal, auto, realty and banking were trading in the positive zone, with gains of up to 2.00 per cent.
Sentiment turned for the better, in tandem with a higher opening in Europe, with all eyes now on the US Federal Reserve as it prepares for its latest policy meeting.
Maruti Suzuki led the pack of gainers, followed by Tata Steel, BHEL, M&M, Tata Motors, HDFC Bank, Cipla, Asian Paint and ITC, rising by up to 3.73 per cent.
Among other Asian markets, the Shanghai Composite index rose 0.61 per cent while Japan's Nikkei fell 0.49 per cent and Hong Kong's Hang Seng up 0.01 per cent.