The sentiment-driven rally also got support from stock specific earning results and Finance Minister Arun Jaitley's statement that the Centre will step up reforms to attract more investment and fill up infrastructure deficit.
However, the momentum turned range-bound with investors being cautiously optimistic about the US poll outcome, while a fag-end buying saw key indices recovering from the day's low.
Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services Ltd, said, "Despite benchmark indices surging in the closing hours, markets wore a jaded look, with market breadth also declining after a firm opening. While improved chances of Hillary in the US elections, has upped the risk appetite, sectoral moves await key changes and IT, pharma sectors which have seen a lot of turbulence lately, remain cautious."
The NSE Nifty ended 46.50 points, or 0.55 per cent, higher at 8,543.55 after moving between 8,559.40 and 8,480.10.
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In the broader markets, mid-cap index also rose by 0.36 per cent while small-cap index gained 0.16 per cent.
Buying was led by auto, industrials, oil & gas, banks, financials and utilities -- supported by second-line shares of mid-cap and small-cap industries. While selling was seen in healthcare, FMCG and realty counters.
Globally, most Asian markets extended gains on hopes Hillary Clinton will beat Donald Trump in Tuesday's presidential election but traders are cautious, with many opinion polls saying the race is too close to call.
"Today's sharp positive reaction is unlikely to sustain in
the near term. Today's strong bounceback is due to the underperformance of India compared to the rest of the world in recent times and short covering post yesterday's negative RBI action," added Nair.
The market breadth turned positive as 1,827 stocks ended higher, 814 closed lower while 167 ruled steady.
The total turnover on BSE fell to Rs 2,446.94 crore, from Rs 2,549.47 crore in the previous trading session.