the monetary policy review next week.
Banking shares rose on value buying with the State Bank of India Ltd rising 3.5 percent and Axis Bank Ltd ending 3.15 percent higher.
Dealers said state-owned banks were playing catch-up to the rally in private peers due to relatively attractive valuations.
Among midcap banks Union Bank Ltd rose 7.8 percent, while Bank of India Ltd surged 10.4 percent.
Shares of Larsen & Toubro Ltd gained 1.4 percent, adding to Monday's 7 percent rise after Goldman Sachs added the stock to its "conviction buy list," citing valuations and growth potential among other factors.
Shares in companies owned by foreign promoters also rallied for a second day after the central bank said on Friday it would allow non-residents to buy stocks of listed domestic firms through the foreign direct investment route.
ABB India Ltd rose 3.2 percent, adding to Tuesday's 17.43 percent gain, while Siemens Ltd gained 8 percent, totalling a gain of 16.3 percent in two days.
However, Tata Motors Ltd declined 2.5 percent as a near-10 percent rise on Tuesday was seen as overdone.
Tata Motors said later that global wholesale vehicle sales fell by 16 percent in August, hit by a drop in passenger vehicle sales at India's largest automaker by revenue.
Cairn India Ltd fell 2.6 percent as Brent crude futures declined more than 4 percent in the previous two days as fears of an imminent strike against Syria eased.
($1 = 63.9575 Indian rupees)