Market benchmark BSE Sensex jumped over 250 points in early trade on Wednesday driven by foreign fund inflow and hopes of tax sops for equity investors.
After reclaiming the psychological level of 40,000 mark, the 30-share index pared some gains to trade 128.48 points, or 0.32 per cent, higher at 39,960.32, and the broader NSE Nifty advanced 35.85 points, or 0.30 per cent, to 11,822.70.
Top gainers in the Sensex pack included Bharti Airtel, L&T, Infosys, ITC, Vedanta, HDFC Bank, Bajaj Auto, Kotak Bank and Sun Pharma rose up to 2 per cent.
On the other hand, Tata Motors, Yes Bank, IndusInd Bank, Tata Steel, ICICI Bank and TCS fell up to 3 per cent.
In the previous session, the 30-share Sensex ended 581.64 points, or 1.48 per cent, higher at 39,831.84. Likewise, the Nifty rallied 159.70 points, or 1.37 per cent, to close at 11,786.85.
According to Sandeep Nayak, ED and CEO of Centrum Broking, a proposed review of key taxes such as long term capital gains (LTCG), securities transaction tax (STT) and dividend distribution tax (DTT) before the budget has added impetus to domestic investor sentiment.
However, gains were capped as investors also took cues from weakness in other Asian equities amid reports of a possible delay in the US-China trade deal, traders said.
Market is also awaiting cues from US Federal Reserve's policy decision, scheduled to be announce later in the day.
Sectoral indices at the National Stock Exchange were mixed with Nifty IT up by 1.1 per cent but auto, pharma and private banks were in the red. Nifty PSU Bank index was the top-performing index, up nearly 2 per cent,
Shares of Vodafone Idea and Bharti Airtel jumped up to 8.5 per cent amid reports that the government has constituted a panel to work out a bailout package for the telecom sector.
Vodafone Idea's shares zoomed 8.57 per cent to Rs 4.18 on the BSE and Bharti Airtel also gained 3 per cent to Rs 370.80.
As the telecom sector stares at a massive payout following a Supreme Court order, the Centre has created a Committee of Secretaries to work out a financial bailout package that may include lowering of spectrum charges as well as ending the era of free mobile phone calls and dirt cheap data.
The Committee of Secretaries has been asked to examine "all aspects" of "financial stress" faced by service providers such as Bharti Airtel and Vodafone-Idea and suggest measures to mitigate them, sources in the Department of Telecommunications (DoT) told PTI.
Expectations of further relief measures from the government in the form of tax cuts, along with hopes of healthy quarterly results, also buoyed the key Indian equity indices higher during the early-morning trade session on Wednesday.
Oil marketing firms IndianOil Corporation and Bharat Petroleum Corporation edged higher by 2.6 per cent and 1.8 per cent respectively after Prime Minister Narendra Modi said a day earlier that India will invest 100 billion dollars in oil and gas infrastructure to meet energy needs of an economy that is being targeted to nearly double in five years.
The other prominent gainers were IT majors Infosys and Wipro, Grasim, Larsen & Toubro and Vedanta. However, those which lost marginally were Tata Motors, Cipla, Coal India, Eicher Motors and IndusInd Bank.
(With inputs from agencies)
