Shares rose nearly 1 per cent on Wednesday on optimism that India, which imports almost a third of its crude requirements, would benefit from weak oil prices on the back of the Iran nuclear deal.
Blue-chip stocks rose on hopes lower crude oil prices would help India control its twin deficits and inflation, thereby creating headroom for the central bank to ease borrowing costs further.
Oil prices dipped on Wednesday as the market prepared for a gradual increase of Iranian exports into an already oversupplied market from 2016 after six world powers and Tehran reached a nuclear deal on Tuesday.
Under the deal, sanctions imposed by the United States, the European Union and the United Nations are to be lifted in exchange for curbs on Iran's nuclear programme.
"If the oil cost comes down, overall impact would come on the Reserve Bank of India's credit policy straight away because I think inflation would remain under control," said Deven Choksey, managing director, KR Choksey Securities.
Choksey added the overall economy would benefit from low oil prices as it would kickstart infrastructure projects and also bring down the cost of funds .
The Sensex ended the day 0.95 per cent or 265.39 points higher at 28,198.29.
Of the Sensex 30, Tata Steel, BHEL, Vedanta and Hindustan Unilever finished down.
The wider Nifty of NSE gained 70 points or 0.82 per cent to 8,523.80 as 42 constituents of the index advanced.
Blue-chips led the gains. Reliance Industries rose 1.1 per cent while Infosys gained 1.1 per cent.
Among major gainers, Maruti rose by 2.7 per cent, Tata Motors 2.2 per cent, Wipro 1.8%, HDFC 1.9%, TCS 1.4% and Lupin 1.6%.
Stocks of consumer durables fell heavily; Bajaj Electricals was down by 4.4%, Titan by 2.7% and Symphony by 1.6%.
Brokers said fresh buying by investors in selective bluechip stocks at prevailing levels and a firm trend at other Asian markets after data showed China’s economy grew more than expected in the second quarter, mainly fuelled the recovery. Buying activity also spread to small-cap and mid-cap company stocks, they said.
China’s gross domestic product grew 7 per cent over April-June, which was better than analysts’ expectations.
The Greek parliament's vote on EU-prescribed austerity measures later in the day is also being keenly watched.
Stock specific action
Maruti shares jumped on reports Credit Suisse had raised the target price for the company to Rs 5,100 from Rs 4,370. The international brokerage has maintained its outperform rating on the stock, reports said.
Shares of Zee Entertainment Enterprises came sharply off the three-month high it had touched in a kneejerk reaction to robust April—June earnings, due to profit booking, as the stock had already risen for four consecutive session in anticipation of the same.
The stock ended the day 0.29 per cent higher at Rs 376, off its three-month high of Rs 385.90. The company’s consolidated net profit rose 14.3 per cent on year to Rs 240 crore, beating analysts’ consensus estimate of Rs 220 crore.
Sun TV shares fell 4.2 per cent to Rs 267.40 on the BSE on media reports that the company may not be able to participate in the FM radio auctions.
Global markets
Asian stocks struggled to keep their gains on Wednesday as a renewed slide in Chinese equities eclipsed upbeat data from the world's second-biggest economy, while the euro slipped ahead of a Greek parliamentary vote on austerity measures.
Investors also awaited congressional testimony by the US Federal Reserve chief later in the session.
Financial spreadbetters predicted European bourses would get a lift from Wall Street's gains, with Britain's FTSE 100 seen opening up as much as 0.3 per cent, Germany's DAX 0.4 per cent higher, and France's CAC 40 was expected to tack on 0.5 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan was slightly lower in afternoon trade as Chinese shares skidded, with Shanghai's benchmark composite index down 4.2 per cent, and the CSI300 index of the largest listed companies in Shanghai and Shenzhen falling 4.6 per cent.