At 2:55 pm, the Sensex traded 332 points or 0.86 per cent higher at 38,889 while the Nifty was up 93 points or 0.81 per cent at 11,592.

Top percentage gainers in the 50-scrip Nifty index were JSW Steel, Vedanta, Dr Reddy's Labs, Zee Entertainment, Tata Steel and Hindalco, up between 1.86 per cent and 3.18 per cent.

Market breadth was neutral, with 1,174 stocks on the Bombay Stock Exchange (BSE) trading higher and 1,163 struggling with losses.

Reliance Industries, HDFC Bank, HDFC and State Bank of India (SBI) contributed the most to the upmove in the Sensex.

The government is due to release data on consumer inflation and industrial production on Friday. The Reserve Bank of India (RBI) tracks CPI or Consumer Price Index based inflation data primarily while formulating its monetary policy.

IT major Infosys will report its earnings for the quarter ended June 30 on Friday. Earlier this week, TCS, the country's largest IT services exporter, reported a net profit of R. 8,131 crore for the June quarter.

InterGlobe Aviation, promoter of India's largest airline IndiGo, shares fell for second straight session after one of its co-founder Rakesh Gangwal alleged corporate governance issues at the company and approached market regulator Sebi to intervene in the matter. IndiGo shares fell as much as 8.93 per cent to Rs 1,273 on top of yesterday's 19 per cent decline.

Fourteen of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Telecom Index's 0.9 per cent gain. Auto, Healthcare, FMCG, Energy, Utilities, Metal, Oil & Gas, Power and Realty sector gauges also rose between 0.5 and 0.9 per cent each.

On the flipside, S&P BSE Consumer Durables Index was top loser, down 0.9 per cent.