However, the markets gave up some of the gains in the first few minutes of trade. At 9:21 am, the Sensex traded 121.30 points - or 0.33 per cent - higher at 36,811.80, while the Nifty was up 39.80 points - or 0.37 per cent - at 10,895.30.

Top gainers on the 50-scrip index at the time were HCL Tech, Hero MotoCorp, Yes Bank, Infosys and Bharti Airtel, trading between 1.28 per cent and 3.74 per cent higher.

Market breadth favoured gains, with 528 stocks on the BSE trading higher and 406 struggling with losses. On the NSE, 801 stocks advanced while 658 declined.

Infosys, HCL Tech, HDFC Bank and TCS contributed the most to the upmove in Sensex.

Mahindra and Mahindra (M&M) said on Wednesday it saw a "huge danger" of job losses in the ailing domestic auto sector, as it sought government intervention including tax reductions to revive demand. Mahindra & Mahindra shares traded with mild gains in early deals, up 0.89 per cent at one point.

A lending crisis among the country's non-banking financial companies, which fund nearly 55-60 per cent of commercial vehicles and 30 per cent of passenger cars, has led to auto makers to either cut production or temporarily close plants.

On the other hand, Cipla shares fell as much as 3.41 per cent, a day after the pharmaceuticals major reported its earnings for the April-June period. Cipla's net profit grew 5.97 per cent to Rs 478.19 crore in the quarter ended June 30, according to a regulatory filing.

Meanwhile, equities in other Asian markets rose amid somewhat easing concerns about the ongoing US-China trade conflict. MSCI's broadest index of Asia-Pacific shares outside Japan bounced 0.6 per cent, though it was still down more than 7 per cent over the past two weeks. Japan's Nikkei edged up 0.6 per cent and Chinese blue chips rose 0.9 per cent. E-Mini futures for the S&P 500 firmed 0.2 per cent.

Investors have increasingly come to fear the trade war will prove protracted enough to tip the world into recession, and have piled into bonds and gold as a hedge.