The 50-share NSE Nifty gained 53.30 points or 0.61 per cent to 8,778.
Snapping a two-session losing run, the Sensex surged 146 points on Thursday to close at 28,301, powered by IT stocks, after bellwether TCS said it will consider a share buyback proposal next week.
Value-buying in pharma and other counters and upbeat macroeconomic data also supported the rebound.
Sentiment got a lift after the country's largest software company Tata Consultancy Services (TCS) said its board will meet on February 20 to consider a proposal for buyback of equity shares of the company.
The 30-share Sensex, after opening on a strong note at 28,223.85, succumbed to profit-booking and slipped to hit the day's low of 28,146.19, before bouncing back to close higher by 145.71 points, or 0.52 per cent at 28,301.27. It touched an intra-day high of 28,327.84.
The gauge had lost 196.06 points in the last two days.
The 50-share NSE Nifty gained 53.30 points or 0.61 per cent to 8,778. Intra-day, it shuttled between 8,783.95 and 8,719.60.
"Positive macro data gave support to buoyant market sentiment. Exports rose 4.32 per cent to $22.11 billion in January and imports rose 10.7 per cent to $31.95 billion," said Karthikraj Lakshmanan, senior fund manager - Equities, BNP Paribas Mutual Fund.
In the IT space, shares of TCS rallied 1.29 per cent to Rs 2,446.90, while Infosys soared 3.01 per cent to Rs 1,011.90 and Wipro rose 1.36 per cent to Rs 481.05.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 225.84 crore (Rs 2.26 billion) yesterday, as per provisional data released by the stock exchanges.
Shares of SBI and its associates soared after the Cabinet approved their merger, a step aimed at strengthening the sector through consolidation of public banks.
Seeking to create a global-sized bank, the Cabinet yesterday gave the go-ahead to the merger plan of SBI and its five associates.
The scrip of State Bank of Mysore soared 4.51 per cent, State Bank of Bikaner and Jaipur gained 3.48 per cent, State Bank of Travancore jumped 3.85 per cent while SBI gained 0.65 per cent on the BSE.
Sun Pharma, which had been under pressure in the past few sessions on disappointing earnings, emerged as the top gainer among Sensex constituents by recovering 4.31 per cent to Rs 649.30 on value-buying.
A mixed trend at other Asian bourses, tracking another record closing at the US markets yesterday after President Donald Trump reiterated his promise to unveil a tax reform plan soon, too influenced sentiment, brokers said.
Hong Kong's Hang Seng rose 0.47 per cent and Shanghai Composite Index gained 0.52 per cent, while Japan's Nikkei fell 0.47 per cent.
European markets, however, were subdued in early deals as London's FTSE fell 0.44 per cent, Paris CAC 40 shed 0.29 per cent and Frankfurt was down 0.22 per cent.
The BSE Mid-Cap index provisionally rose 1.25 per cent, while the Small-Cap index gained 1.35 per cent.
Of the 30-share Sensex pack, 19 scrips ended higher while 11 others finished lower.
Major gainers included Infosys (3.01 per cent), Maruti (2.84 per cent), Tata Motors (2.14 per cent), Tata Steel (2.11 per cent), Cipla (1.75 per cent), Gail (1.69 per cent), RIL (1.34 per cent), TCS (1.29 per cent), Wipro (1.26 per cent) and (M&M 1.15 per cent).
However, index heavyweight ITC declined 2.45 per cent, followed by Asian Paints (1.18 per cent), Adani Ports (0.75 per cent), L&T (0.66 per cent), ICICI Bank (0.66 per cent), Coal India (0.56 per cent) and HDFC (0.35 per cent).
Among BSE sectoral indices, healthcare rose 2.46 per cent, realty 2.14 per cent, IT 2.04 per cent, metal 2.00 per cent, consumer durables 1.66 per cent, teck 1.64 per cent and auto 1.61 per cent.
FMCG was the sole loser, falling 0.92 per cent.
Market breadth turned positive as 1,811 shares ended higher, 987 closed lower while 180 ruled steady.
Total turnover on BSE amounted to Rs 2,618.23 crore (rs 26.18 billion), lower than Rs 3,412.57 crore (Rs 34.13 billion) registered during the previous trading session.