The rise was led by heavyweights ITC and Reliance Industries. Metals, FMCG and realty stocks advanced on gains in the Asian and European markets.
"Recovery in Asian and European markets post positive China data boosted the market sentiment," said Nidhi Saraswat, senior research analyst at Bonanza Portfolio Ltd. "GDP data had been disappointing at 4.4 per cent. However it didn't affect the market much as this had been already discounted."
The 30-share Sensex resumed higher stayed in positive terrain through the day before ending at 18,886.13, a rise of 266.41 points or 1.43 per cent. It was the fourth session of gains for the index, which is at the highest level since the August 14 close of 19,367.59.
The broader Nifty index on the National Stock Exchange rose 78.95 points, or 1.44 per cent, to 5,550.75. The SX40 index on the MCX-SX, closed at 11,176.25, up 237.76 points.
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The country's GDP growth slipped to 4.4 per cent in the April-June quarter, the slowest pace since the 2008 financial crisis, compared with 4.8 per cent in the January-March period and 5.4 per cent a year earlier.
The HSBC/Markit purchasing managers index (PMI) for India's manufacturing industry contracted for the first time in over four and a half years and stood at 48.5 in August.
Brokers said easing crude oil prices might help in cooling inflation and trimming the current account deficit.