Sensex, Nifty rose 1 percent on Wednesday, with financial stocks accounting for nearly half the gains, while investors awaited the outcome of the U.S. Federal Reserve policy meet later in the day.
Investors expect the Fed to announce a quarter-point hike, but are less sure if it will signal three or four for the entire year.
The broader NSE Nifty was up 1 percent at 10,225.30 as of 0545 GMT, while the benchmark BSE Sensex rose 1.07 percent to 33,350.13.
The NSE index was trading above the 200-day simple moving average of 10,169.29.
"In the last few days, the market has been in a correction phase. There have been a lot of negative factors like chances of a rate hike, domestic political instability along with rupee depreciation. I think the market has priced in all these negative factors," said Prateek Jain, Director at Hem Securities.
"We should see a decent upside from here."
Financials led the gains, with the Nifty Finance index up 1.3 percent. State-run lenders also advanced, with the Nifty PSU bank index rising as much as 2.2 percent.
Housing Development Finance Corp rose 1.6 percent, while State Bank of India gained 1.8 percent.
Among other gainers, construction and engineering firm Ashoka Buildcon Ltd posted its biggest intraday rise since July 2015 after winning two road projects.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent.