Traders say there are increasing expectations that the government will also unveil fiscal reforms which will aid foreign flows and sentiment.
Rising speculation that the government will soon hike diesel prices by close to 10 percent in a bid to cut the biggest item in the country's import bill also helped shares.
Indian shares will also watch the US non-farm payrolls data due to be released post market hours on Friday.
The data will be key in helping the market get some clarity on when the Federal Reserve may look to potentially withdraw its monetary stimulus.
Traders will also await the industrial output data due to be released on Thursday for cues ahead of the central bank's monetary policy on Sept. 20.