After rallying nearly 300 points during the day, the BSE gauge settled 165.94 points, or 0.42 per cent, higher at 39,950.46. The index hit an intra-day high of 40,066.31 and a low of 40,066.31.

Similarly, the broader NSE Nifty rose 42.90 points, or 0.36 per cent, to settle at 11,965.60. During the day, the index touched a high of 12,000.35 and a low of 11,904.35.

Top gainers in the Sensex pack were Tata Motors, ONGC, Yes Bank, IndusInd Bank and Vedanta -- rising up to 2.71 per cent. On the other hand, Sun Pharma, M&M, L&T, Coal India and HUL fell up to 3 per cent.

Sectorally, metal, oil and gas and banking indices rose as much as 1.33 per cent.

Markets traded on a positive note following favourable global cues in Asian markets as sentiments turned upbeat after the US announced deal with Mexico and investors turned hopeful of further progress on US-China trade talks, said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares and Stock Brokers.

In Asia, Shanghai Composite Index rallied 2.58 per cent, Hang Seng ended 0.76 per cent higher, Nikkei rose 0.33 per cent and Kospi gained 0.59 per cent. Bourses in Europe were also trading higher in their early deals.

On the currency front, the Indian rupee appreciated 21 paise to 69.44 against the US dollar. Brent crude futures, the global oil benchmark, fell marginally to USD 62.24 per barrel.