Successful Italian and Spanish bond auctions and remarks from the European Central Bank chief Mario Draghi that the bloc`s debt markets seem to have stablized sent global markets upwards. Traders said positive global markets had a positive rub-off on local bourses.
The 30-share Sensex opened strong and remained in the positive terrain throughout the day.
The key index touched a five-week intra-day high of 16,257.34 before falling back on profit-booking in late mid-session. It finally settled at 16,154.62, up by 117.11 points or 0.73 per cent from its last close.
The 50-issue Nifty of the NSE also rebounded by 34.75 points or 0.72 per cent to 4,866.00.
Increased buying by foreign funds and expectations of rate cut by the Reserve Bank in its monetary policy review on January 24 following fall in food inflation and smart rise in industrial production data also boosed the market sentiment.
The metal sector index gained the most by 3.21 per cent to 10,756.45 on BSE. Tata Steel surged 7.11 per cent to Rs 415.70 and Coal India by 5.56 per cent to Rs 343.60.
The capital goods sector was the second best performer by adding 2.86 per cent to 9,297 with Suzlon Energy gaining 8.72 per cent to Rs 22.45 and Larsen and Toubro by 3.84 per cent to Rs 1,172.60.