The S&P BSE Sensex and NSE Nifty indices rebounded on Wednesday, tracking broader Asian equities, as upbeat comments by US President Donald Trump stoked hopes that Washington and Beijing would hammer out an interim trade deal soon.
In the last few months, markets have swung back and forth, rallying on headlines suggesting the barest progress, even as an agreement has yet to be nailed down.
Mr Trump said the US and China were close to an agreement on the first phase of a deal, while stressing Washington's support for protesters in Hong Kong, a point of contention between the world's two largest economies.
His comments sent MSCI's broadest index of Asia-Pacific shares outside Japan up 0.19 per cent, fanning hopes of an easing of tariff hostilities.
The S&P BSE Sensex index jumped 254.46 points to an intraday high of 41,075.76 on Wednesday, and the broader NSE Nifty 50 benchmark climbed to as high as 12,108.50, up 70.8 points from the previous close.
"Leading stocks are making higher highs," said analysts at William O'Neil in a note on the markets. "These are positive indications for the rally to sustain."
Auto stocks led gains in the Nifty index as their main sub-index rose 1.2 per cent. Shares of Eicher Motors gained as much as 2.17 per cent, Tata Motors advanced 2.11 per cent, while Maruti Suzuki climbed 1.6 per cent.
Yes Bank - the top gainer in the Nifty - climbed as much as 9.2 per cent to its best session in nearly four weeks, with the Nifty private-bank index advancing 0.4 per cent.
Meanwhile, Cipla and Zee Entertainment were the session's top drags, dropping up to 2.33 per cent and 1.03 per cent, respectively.
The stock markets however gave up most of those gains by afternoon. At 12:15 pm, the Sensex traded 68.66 points (0.17 per cent) higher at 40,889.96 while the Nifty was up 26.95 points (0.22 per cent) at 12,064.65.