The 30-share index had slipped to 18,309.81 in early trade but buying in realty and FMCG stocks helped the barometer recover. The index closed higher by 131.06 points, or 0.72 per cent, at 18,460.38 points.
The broad-based National Stock Exchange index Nifty rose by 43.25 points, or 0.78 per cent, to 5,614.80.
Trading sentiment improved as Finance Minister P Chidambaram said the government unperturbed over Opposition plans to move motions over issues, including FDI in retail, in Parliament as it is confident of support from all allies.
Retailers led by Pantaloon and Koutoon were in the limelight and recorded handsome gains on expectations the government will push through the decision of opening retailing to foreigners in a wave of policy making.
Investors were picking recently hit stocks of realty, private secor lenders and IT as economic reforms pave more revenues from overseas markets.
Sentiment further get a boost from firming Asian markets.
The realty sector index gained the most by adding 2.47 per cent to 1,877.82 followed by FMCG sector by 1.41 per cent to 5,780.06.
Consumer durable index rose by 1.40 per cent to 7,492.07 and banking index by 1.27 per cent to 13,156.39.
Markets @ 09.00 AM (Reuters)
The Sensex gains around 0.5 per cent, while the Nifty advances 0.42 percent. Shares in software services exporters gain tracking the weakening rupee, which has fallen 2.4 percent against the U.S. dollar this month as of Tuesday's close.
Tata Consultancy Services gains 1.4 percent, while Infosys gains 0.5 percent.
However, shares in Bharti Airtel fall 1 percent on profit booking after surging 14.6 percent so far in November as of Tuesday's close.