The Sensex, which ended with losses in the previous session, rebounded to settle the day higher by 409.04 points at 16,849.60, a level last seen on October 23.

The key index moved between 16,887.80 and 16,405.19 during the day.

In a similar fashion, the National Stock Exchange index Nifty shot up 122.25 points to regain the 5,000-point level.

The rally was mostly supported after the market leader Reliance Industries rose 2.70 per cent to Rs 2,107.95. The second heaviest among Sensex stocks Infosys Technologies also gained 4.08 per cent to end at Rs 2,308.70. Together they carry nearly 23 per cent weight on the Sensex.

On across-the-board buying, all the 30-BSE kitty stocks ended in positive zone. Software exporters surged after Nasscom raised its forecast on the sector.

Trading sentiment also got a boost from bullish Asian stock markets and a higher opening in Europe.