The Sensex, which lost 2.4 per cent in the last two trading sessions, gained 80.50 points at 8,902.56, after touching the day's high of 8,995.04.

Buying activity picked up on expectations that the government's decision to reduce direct and indirect taxes might boost industrial demand.

The 50-share National Stock Exchange index Nifty rose by 28.60 points at 2,762.50 and touched the day's high of 2,789.35 points.

Trading volume remained restricted as the market, which was increasingly tracking global cues, adopted a cautious approach with the general elections approaching, brokers said.

The US Standard and Poor’s 500 Index jumped 4 per cent in New York, the most in a month, as the US Federal Reserve said there was a "reasonable prospect" the current recession will end this year.