The country's Wholesale Price Index (WPI) data showed a dip to five-month low of 6.16 pct in December amid easing vegetable prices would give RBI some edge to keep interest rates on hold at its approaching policy meet on January 28.
Along with lower headline inflation, positive global markets coupled with World Bank's projection of 6 per cent growth in Indian economy also supported the sentiment.
Across the board buying was seen, while interest- rates sensitve sectors jetted with bank nifty notching 1.61 per cent followed by realty and auto sectors.
The market opened higher on firm Asian cues and continued to trade up in morning trade, it extended gains on higher European markets to hit fresh intraday highs during afternoon, later pared the gains slightly before ending green.
The 50-share Nifty hovered between a high of 6,325.20 and a low of 6,265.30 before settling at 6,320.90, a sharp gain of 79.05 points, or 1.27 per cent, over the previous close.
The major gainers were Ultracemco, Bank of Baroda, SSLT, NMDC, PNB, L&T, ICICI Bank, HDFC, IDFC and BHEL.
Turnover in the cash segment climbed to Rs 11,282.01 crore from Rs 8,849.06 crore yesterday. A total of 5,943.96 lakh shares changed hands in 59,47,253 trades, while market capitalisation stood at Rs 68,67,217 crore.