At 9:38 am, the Sensex traded 359.29 points - or 0.92 per cent - higher at 39,405.63 while the Nifty was up 108.55 points - or 0.93 per cent - at 11,800.05.

Top gainers on the 50-scrip benchmark index at the time were Tata Steel, Indiabulls Housing Finance, Kotak Mahindra Bank, Vedanta, Tata Motors and Hindalco, trading between 2.03 per cent and 3.72 per cent higher.

Reliance Industries, HDFC and Kotak Mahindra Bank contributed the most to the advances in Sensex.

Analysts say hopes of easing monetary policy going forward have led to a spike in world markets.

Global equities are witnessing a liquidity-fuelled rally as comments from central banks globally hinted at a rate cut, said Sunil Sharma, chief investment officer of Sanctum Wealth Management.

"In a scenario of slowing global growth and benign crude prices, policymakers are reverting to easy monetary policy and lowering the cost of capital," he was quoted as saying in a Press Trust of India report.

Equities in other Asian markets jumped on Wednesday as investors hoped the Federal Reserve would follow the lead of the European Central Bank and open the door to future rate cuts at its policy meeting later in the day. ECB President Mario Draghi's shock turnaround on easing fuelled talk of a worldwide wave of central bank stimulus, firing up stocks, bonds and commodities.

Adding to the cheer was news US President Donald Trump would meet with Chinese President Xi Jinping at the G20 summit later this month, and that trade talks would restart after a recent lull.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.6 per cent, adding to a 1 per cent gain the day before. Japan's Nikkei rose 1.5 per cent and South Korea 1.1 per cent. Overnight in the US, the Dow Jones industrial average, the S&P 500 and the Nasdaq Composite finished 1.35 per cent, 0.97 per cent and 1.39 per cent higher respectively.