The 30-share barometer rose by 141.43 points, or 0.67 %, to close at 21,205.05 points. The index, which lost 226 points in the last two sessions, touched a low of 21,001.13 points in day trade.
Brokers said sentiment improved as the third-largest software provider Wipro posted attractive earnings for the third quarter ending December 2013.
The IT sector index advanced the most rising by 2.83 % to 9,661.46. TCS rose by 5.53 %, Wipro by 3.77 % and Infosys by 0.59 %.
The broad-based National Stock Exchange index Nifty rose by 52.30 points, or 0.68 % to 6,303.95. It touched the day's low of 6,243.35.
Weak overseas trends and a fall in index major Reliance Industries, however capped the gains. RIL fell by 1.70 % to Rs 869.50.
Among 30-Sensex stocks, 16 closed with gains. BHEL, Axis Bank, HDFC Bank, Hero MotoCorp, ICICI Bank, ITC, Mahindras and Mahindra and State Bank of India were among major gainers.
The Teck index was the second best performer and rose by 2.50 % to 5,275.54, followed by FMCG index which settled up by 1.08 % to 6,619.06.