While the Sensex closed 276 points or 0.87 percent higher to 32,158 level, Nifty rose 87 points or 0.87 percent to 10,093.05 points. Shares of heavyweight companies such as Reliance Industries, Sun Pharma, HDFC Bank contributed the most while ITC and HDFC capped the gains.
Nifty Realty (down 1.26 per cent) was the top sectoral loser on NSE.
Industrial production remained subdued as output grew by a mere 1.2 percent in July as against 4.5 percent growth in July past year. The pan-European Stoxx Europe 600 index rose half a percent to extend gains for a fifth day. IndusInd Bank jumped 5.6% to lead a gauge of private banks on the NSE higher by 1.3% after the lender said it has entered into an agreement with micro-finance company Bharat Financial Inclusion to evaluate a potential merger between the two.
All Bank Nifty stocks except IndusInd Bank closed in the green. The benchmark index had last moved through 32000 on 7 August, and has gained 220.19 points in the previous three sessions.
"Volatility emerged as the market reached near the all- time high, which pulled the index to close negative while FIIs continue to be a net seller", said Vinod Nair, Head of Research, Geojit Financial Services Ltd. Losses in BPCL, IOC, ITC Ltd, Indiabulls Housing and Eicher Motors dragged the index into the negative zone.
IIP growth for June has also been revised downwards to minus 0.2 percent from minus 0.1 percent. USA shares were set to drift higher, with Dow futures adding 0.2 percent to 22,052 and S&P 500 futures gaining 0.1 percent to 2,487.60. Australia's S&P/ASX 200 was up 0.6 percent at 5,746.40, while South Korea's Kospi edged up 0.3 percent to 2,365.47. However, the Hong Kong Hang Seng fell 78 points, and the Taiwan TSEC 50 Index 77 points. Stock markets opened with gains also backed the rupee, they added.