Benchmark BSE Sensex rallied over 1 per cent while Nifty closed above the 16,500 mark on Wednesday after sharp gains in IT, oil & gas and metal shares amid positive global market trends.

The 30-share BSE Sensex rallied 629.91 points or 1.15 per cent to settle at 55,397.53 as 22 of its stocks ended with gains. During the day, it jumped 862.64 points or 1.57 per cent to a high of 55,630.26.

The broader NSE Nifty climbed 180.30 points or 1.10 per cent to 16,520.85 with 34 of its constituents ending in the green.

Buying in index majors Reliance Industries, Infosys and Tata Consultancy Services and FII inflows bolstered the sentiment.

Reliance Industries rallied 2.47 per cent and ONGC spurted 4 per cent as the government slashed windfall tax on petrol, diesel, jet fuel and crude oil.

The government on Wednesday cur the windfall tax on petrol, diesel, jet fuel and crude oil following a decline in international rates.

"The move is definitely positive for companies like RIL, ONGC and Oil India as the decline in windfall tax would mean better and more sustainable margins. These companies were clear beneficiaries of high oil prices, but the recent correction in oil prices coupled with one of the highest windfall taxes globally could have dented profitability," Rohit Khatri, AVP-Fundamental Research, Religare Broking Ltd.

Among the Sensex constituents, Tech Mahindra rose the most by 3.84 per cent. HCL Tech rose by 3.08 per cent, Tata Consultancy Services by 2.89 per cent, and Infosys by 2 per cent.

Reliance Industries jumped 2.47 per cent, SBI by 2.13 per cent and HUL by 1.55 per cent.

Wipro rose by 1.63 per cent ahead of its financial results which were announced after market hours. Its consolidated profit dropped 21 per cent to Rs 2,563.6 crore in April-June 2022-23.

Mahindra & Mahindra fell the most by 1.81 per cent, while Sun Pharma, Kotak Mahindra Bank and Asian Paints also declined.

"Indian stocks led a steady climb as a result of encouraging signals from both domestic and international markets. Reduced export duty and windfall taxes improved the mood of oil producers.

"Strong quarterly results in the US market boosted the rally, while the European market rose as worries over Europe's energy supply eased. If sustained buying from FIIs prevails, it will provide a cushion to the upward rally in the domestic market," said Vinod Nair, Head of Research at Geojit Financial Services.

In the broader market, the BSE smallcap gauge jumped 0.42 per cent and midcap index climbed 0.25 per cent.

Among BSE sectoral indices, IT jumped the most by 2.58 per cent, followed by teck (1.99 per cent), metal (1.35 per cent) and FMCG (1.13 per cent).

Telecom, utilities and auto were among the lagards.

"The sharp 8 per cent pullback in Nifty from June lows of 15,183 is all set to continue aided by a flood of good news. First, the US markets have rebounded sharply driven by impressive corporate earnings. Second, FPI selling appears to have bottomed out. FPIs have bought 5 days this month," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said.

World stock markets advanced on strong quarterly results by companies.

In Asia, markets in Tokyo, Seoul, Shanghai and Hong Kong ended significantly higher following overnight gains in US markets.

Markets in Europe were trading mostly higher during mid-session deals.

Meanwhile, international oil benchmark Brent crude declined 1.17 per cent to USD 106.1 per barrel.

Foreign institutional investors remained net buyers on Tuesday picking up shares worth Rs 976.40 crore, as per exchange data.