The stock markets were also supported by a strengthening rupee that gained 28 paise to trade at 62.34 versus dollar, which was under pressure after the US government shutdown - for the first time in nearly 18 years - as political deadlock over 'Obamacare' led to a budget impasse.
The 30-share Sensex, which fell by over 100 points in early trade, reversed losses to end at 19,517.15, a gain of 137.38 points or 0.71 per cent. The rise comes after the benchmark lost 514 points in the previous two sessions.
Today's Sensex rise is the best daily gain since September 19 when it soared by 684.48 points or 3.43 per cent.
On similar lines, the broad-based National Stock Exchange index Nifty shuttled between 5,786.45 and 5,700.95, before ending 44.70 points higher, or 0.78 per cent at 5,780.05.
"CAD widened by USD 21.8 billion in Q1FY14, below our expectation of USD 25 billion," said Karvy Analyst Kruti Shah.
The upsurge in shares was mostly led by the recent losers like stocks of banking, realty, capital goods and auto stocks on heavy purchased at current attractive levels, brokers said.
They also said a higher trend in the Asian region and good opening in Europe, further influenced the sentiment.
The market also took a positive view of the easing retail inflation that eased marginally to 10.75 per cent in August compared to 10.85 per cent in the previous month.
Sectorally, the BSE Realty sector index gained the most by rising 2.69 per cent, followed by BSE Banking index (2.67 per cent), BSE Capital Goods index (1.53 per cent) and BSE Auto index (0.90 per cent).
Current account gap data, auto sales lift Sensex by 137 pts
BSE Sensex rose nearly 1 percent on Tuesday as lenders recovered from recent steep losses after the Reserve Bank of India's (RBI) announcement that it would purchase bonds eased concerns about the value of the sector's debt holdings.