The broader NSE Nifty 50 index rose 1.6% to 11,227.55 and the S&P BSE Sensex climbed 1.6% to 37,981.63.

"Expectations of a stimulus package from the (Indian) government are also helping," said Aamar Deo Singh, head advisory, Angel Broking.

"Markets have bounced back from important technical levels. 10,800 was an important technical support level and a lot of short covering has also happened," Singh added.

The public sector bank index gained 3.3% and the banking index rose 3.3% after a report said the finance ministry may provide capital support to some public sector banks in the third quarter.

Analysts also said investors were hoping for some support for banks over waiving interest rates on loans under a moratorium, after the government told India's top court that it was in its decision making process. The court will hear the case again on Oct. 5.

Meanwhile, the Reserve Bank of India said it was rescheduling the monetary policy committee meeting that was due to be held between Sept. 29 to Oct. 1.

Shares of multiplex operators PVR Ltd, INOX Leisure Ltd rose as much as 13.5% and 8.0%, respectively, after the state of West Bengal was set to allow theatres to operate from next month.

Shares of India's Lakshmi Vilas Bank Ltd ended up 5.2%, after the country's central bank okayed a three-member committee of directors to run the private lender.

The Nifty metals index rose 3% on expectations of strong demand from top importer China.

In global markets, MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> advanced 0.6%.

By Sethuraman N R