European stocks surged after Germany’s top court gave its backing to the euro zone's new 700 billion euro European Stability Mechanism bailout fund.
German approval of the ESM was crucial to boost the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members.
At 02.12 p.m., the Sensex traded 106 points or 0.6 per cent higher at 17,959 while the Nifty advanced 29 points at 5,419.
Markets shrugged off weak July factory output data, which indicated that the broader economic activity remains weak.
Metal stocks led the gains, rising over 1 per cent on the BSE. On the Nifty, Tata Motors was the top gainer, up 3.9 per cent, followed by Tata Steel, which treaded 2.5 per cent higher.
IT major Wipro, state-run steel maker SAIL, Coal India and Asian Paints traded with over 2 per cent gains on the Nifty.
Among the loser, engineering major Siemens India traded 2.6 per cent lower after its parent sold a 1.2 per cent stake in a deal that could raise up to $50 million.
State-run heavy equipment maker BHEL was down 1.8 per cent. The stock has seen sharp selling over the past many days because of lack of visibility in new orders.
Drug maker Cipla, Reliance Infra, power producer NTPC, and steel maker JSPL were the other big losers, trading with over 1 per cent losses.
Shares in domestic carriers, such as SpiceJet and Kingfisher, gained after the Civil Aviation Minister said he was hopeful of foreign direct investment being allowed in India's airlines. Under the current rules, foreign airlines are barred from buying stakes in domestic carriers, although foreign investors are allowed to hold a cumulative 49 percent.
The market breadth was positive with over 52 per cent stocks rising on the broader BSE 500.
(With inputs from Thomson Reuters)