After rallying over 300 points in day trade, the 30-share BSE Sensex ended 169.14 points, or 0.42 per cent, higher at 40,581.71 ahead of the release of key macro data after market close.
The broader NSE Nifty settled 61.65 points or 0.52 per cent, higher at 11,971.80.
Tata Motors was the top gainer in the Sensex pack, rallying 7.17 per cent, followed by Yes Bank 5.96 per cent, Vedanta 3.68 per cent, Tata Steel 3.29 per cent, SBI 2.91 per cent and Kotak Bank 1.76 per cent.
HDFC Bank rose by 1.18 per cent while Larsen & Toubro advanced 1.23 per cent, helping the index extend gains for a second day.
Reliance Industries, IndusInd Bank, HeroMotoCorp, PowerGrid, NTPC, Sun Pharma and Mahindra & Mahindra also advanced.
On the other hand, major IT stocks dropped due to a strengthening rupee against the US dollar. Infosys fell 2.63 per cent, HCL Tech 1.51 per cent, and TCS by 1.20 per cent. Among others, ONGC declined 1.68 per cent and Bharti Airtel by 0.95 per cent.
Vinod Nair, Head of Research at Geojit Financial Services said, "FED's dovish stance on future rate trajectory and strengthening rupee brings cheer to investors. Global sentiment is likely to turn positive in expectation of delay in US tariff deadline while expecting more positive developments from US-China trade talks."
After its two-day meeting, the US Federal Reserve on Wednesday night indicated that it may not change interest rates throughout next year. The central bank, which has cut the lending rate three times this year, said that it will set its sights on low inflation and the global economy.
Hemang Kapasi, Portfolio Manager - Equity Investment Products, Sanctum Wealth Management said, "With the US Fed keeping the policy rate unchanged and likely to hold on with rates largely throughout next year led to uptick in global markets. India was no exception, all sectors ended in green led by Metals, PSU & Banking Indices while IT was the only sectoral indices ending in red largely led by INR appreciation by a percentage point over last one week."
Investors were also awaiting factory output data scheduled to be released later in the day, traders said.
Sectorally, BSE metal, industrials, auto, bankex, capital goods and power indices rose up to 2.41 per cent.
While BSE IT, telecom and teck indices declined up to 1.53 per cent.
On the currency front, the rupee appreciated 21 paise against the US dollar to 70.63 (intra-day).
Brent futures, the global oil benchmark, rose 0.74 per cent to USD 64.19 per barrel.
Bourses in Hong Kong, Seoul and Tokyo ended on a positive note, Shanghai slipped into the red.
Stocks in Europe were also trading higher. ANS MR MR