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After a positive opening, key indices strengthened in morning deals led by banking and financials along with Reliance, ONGC and ITC.
Market sentiment was boosted by data showing that foreign funds remained net buyers of local stocks, a day earlier. Foreign institutional investors (FIIs) bought shares worth Rs 287.98 crore on Tuesday, as per provisional data from the stock exchanges.
At 11:40 am, the 30-share BSE Sensex was up 116.42 points or 0.52% at 22,582.61 and the 50-share Nifty was up 34 points or 0.5% to 6,749.
The stock market remains closed on Thursday on account of May Day.
Asian shares turned lower on Wednesday, while a stronger yen weighed on Tokyo stocks after the Bank of Japan held policy steady as expected.
Investors stayed cautious before the outcome of the Federal Reserve's policy meeting later in the session as well as key US jobs data on Friday, and against a backdrop of continuing tension in Ukraine.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3%, erasing early gains but still on track for a monthly rise of over 1%.
Hong Kong's Hang Seng index slumped 1.2% as investors locked in gains from a late-afternoon surge on Tuesday that sent it up more than 1% in the final hour before the close.
Japan's Nikkei stock average also erased early gains and shed 0.1%, after the BOJ board decided unanimously to keep monetary policy steady as expected.
The BOJ will release its latest economic projections later on Wednesday. Central bank policymakers will likely keep their inflation forecast for fiscal 2015 roughly unchanged from the current 1.9%, and estimate fiscal 2016 inflation close to 2%, sources have told Reuter
Back home, GAIL (India) was up 2.5%, Dr. Reddy's Laboratories up 2.2%, M&M and ONGC were up 1.6% followed by HDFC which is trading 1.4% higher.
Banking shares, especially those of public sector undertaking (PSU) banks, are in the limelight and have rallied up to 16% after Indian Overseas Bank (IOB) reported strong set of numbers for the quarter ended March 2014. Bank of Baroda hits its 52-week high levels of Rs 837.85.
Indian Overseas Bank lead the pack with over 15% gains while Allahabad Bank, IDBI, Syndicate Bank, Union Bank of India and Bank of India are up 3-5% each on the NSE.
At 1144 hours, the NSE CNX PSU Bank index has gained 2.5% compared with 0.8% rise in the benchmark CNX Nifty.
IOB, the largest gainer among the pack, has soared 17% to Rs 64.20 after reporting an over four-fold jump in net profit at Rs 268 crore for the fourth quarter ended March 31, 2014 (Q4), due to lower provisioning, higher income and cash recovery. The state-owned bank had posted a profit of Rs 59 crore in the year-ago period.
Meanwhile, Bank Nity - the gauge of both private and public banking stocks, rebounded after two days of consolidation. Public banks led the charge here too; Canara Bank, Bank of India and Punjab National Bank are trading 2.5-3.2% while private lenders.
The broader markets were resilient; the BSE mid-Cap and small-cap indices 0.4-0.7%
The market breadth, indicating the overall health of the market, was strong. On BSE, 1337 shares gained and 963 shares slipped.
