Besides stock-specific developments, market participants were also enthused by Finance Minister P Chidambaram's comments to widen tax base and ramp up revenues, brokers said.
The Sensex, which had lost 120 points in the previous sesson, bounced back by 45.04 points, or 0.23% to close at 20,026.61 points.
After a better start, the 30-share index touched day's high of 20,058.07 and a low of 19,920.91 as investors continued to adjust their portfolios after recent gains.
Bharti Airtel closed 4.4% up as it has hiked rates of special tariff vouchers and reduced free minutes usage, barely a month after hiking price of 2G data plans.
Stocks of banking, IT and capital goods sectors attracted buying on steady inflow of better corporate earnings by key index-related companies.
However, HUL shares tanked by 4.4% after reporting quarterly numbers and announcing hike in royalty payment to parent Unilever yesterday.
In the banking sector index, State Bank of India, HDFC Bank, HDFC Ltd and ICICI Bank gained. In the capital goods sector, L&T, BHEL and Siemens and ABB registered gains.
Reliance Industries and Infosys also closed higher.
Outside the index, shares of HDIL tumbled by 14.33%.