They said funds were buyers across the board with most sectors witnessing significant orders.
The Mumbai stock exchange's 30-share Sensex rose 128.65 points to close at 8,072.75. Turnover was moderate at 21.48 billion rupees (478 million dollars) as 1,286 shares gained, while 1,041 declined.
"Investors have started the new year with a strong boost to the Sensex," said Vijay Tilakaraj, chief dealer with domestic brokerage Prabhudas Liladhar.
Dealers said a firm regional trend, despite the US Federal Reserve hiking interest rates, also boosted sentiment locally.
"There was some caution earlier ... as the current week is virtually a two-day week, but investors look once again upbeat after sharp recent losses," another dealer said.
Indian bourses held a 75 minutes ceremonial session Tuesday on the day of the Hindu Diwali festival and to usher in the new year for traders which started Wednesday.
The bourses are also closed Thursday and Friday.
The benchmark Sensex lost over 1,000 points in October on large selling by foreign funds who have been steady investors since January 2005, investing over 8.5 billion dollars.
Leading the gains Wednesday was cement company Grasim which rose 4.74 percent or 53.30 rupees to 1,178.90, Gujarat Ambuja rose 4.65 percent or 3.25 rupees to 73.10, Reliance Industries gained 1.44 percent or 11.0 rupees to 777.10, while Tata Consultancy gained 1.18 percent or 16.60 rupees to 1,425.50.