The BSE Sensex rose on Wednesday, recovering from new July lows made intraday, led by gains in private lenders such as ICICI Bank on hopes they will report better-than-expected quarterly earnings and improving asset quality.
Hopes of reforms to boost growth after the presidential elections on Thursday helped sentiment in a market grappling with concerns over monsoon rains and forecasts of subdued June-quarter earnings for most companies.
The results of the presidential elections are expected on July 22.
"Most important thing after presidential election is whether the government is in a mood to kickstart reforms process, it needs to be seen if diesel de-regulation will happen or not," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors Ltd.
India freed pricing of petrol in 2010 but subsidises prices of diesel, kerosene and cooking gas, weighing on public finances.
The 30-share BSE Sensex rose 0.47 percent to 17,185.09 points, marking its biggest single day percentage gain since July 10.
The 50-share Nifty rose 0.45 percent to end at 5,216.30 points.
ICICI Bank rose 1.7 percent, while HDFC Bank rose 0.6 percent.
Public sector banks such as State bank of India fell 0.6 percent, while Punjab National Bank fell 2.9 percent.
Bajaj Auto Ltd's shares rose 5.25 percent after the country's second-largest motorcycle maker defied market expectations with a rise in its industry-topping profit margins, while posting flat net profit for the June quarter.
Bank of America-Merrill Lynch initiated coverage of Bajaj Finserv with a "buy" rating and a target price of 806 rupees, a day after the company said net profit surged 51 percent in the April-June quarter.
Bajaj Finserv shares ends 4.7 percent higher.
Cadila Healthcare shares gained for the sixth straight session, ending up 4.5 percent, after Credit Suisse initiated coverage on the stock with an "outperform" rating.
The midcap drugmaker has demonstrated "strong execution" in the United States, with a portfolio mix focusing on low competition products such as nasal sprays and injectable drugs, said Credit Suisse, which has a target price of 970 rupees on the stock.
Shares in Coal India rose 1.7 percent to end at 360.30 rupees after CLSA upgraded the stock to "outperform" from "underperform" and raised its target price to 390 rupees from 340 rupees.
IT stocks such as Infosys and Tata Consultancy Services rose on bargain hunting after recent falls.
TCS rose 0.8 percent and Infosys ended 0.4 percent higher.
Dr.Reddy's Laboratories fell 1.9 percent ahead of its quarterly results on Thursday.
Tata Motors shares fell 1.9 percent, after going ex-dividend on Wednesday.
Shares in Adani Power fell 1.1 percent after JP Morgan highlighted concerns over rising debt-equity ratio in a research note.