Rebounding from their worst single-day slide in four years, benchmark stock indices Sensex and Nifty soared over 3 per cent each on heavy value buying by investors after NDA alliance partners started talks on Government formation.

The 30-share BSE Sensex jumped 2,303.19 points or 3.20 per cent to settle at 74,382.24 on value buying in banking, auto and oil shares. All Sensex shares closed in the green. During the day, it zoomed 2,455.77 points or 3.40 per cent to 74,534.82.

The NSE Nifty climbed 735.85 points or 3.36 per cent to 22,620.35 with all its constituents ending with gains. During the day, the benchmark soared 785.9 points or 3.59 per cent to 22,670.40.

Heavy buying in HDFC Bank, ICICI Bank and Reliance Industries helped benchmark indices log sharp gains. Investors became richer by Rs 13.22 lakh crore on Wednesday with markets making a strong comeback.

Senior leaders of the BJP-led National Democratic Alliance deliberated on the details of government formation at a meeting here on Wednesday, a day after the ruling coalition won a majority in the Lok Sabha election which paved the way for a third term for Prime Minister Narendra Modi.

Coalition partner TDP also affirmed that it was with the NDA assuaging investors' concerns over Government formation and triggering a sharp value buying in recent losers.

"Indian market exhibited a spirited recovery driven by broad-based buying across various sectors, as political stability appears assured. However, attention will remain on the formation of the Government and the forthcoming RBI policy meeting," said Vinod Nair, Head of Research, Geojit Financial Services.

Among Sensex companies, IndusInd Bank jumped over 7 per cent. Tata Steel, Mahindra & Mahindra, Bajaj Finance, Kotak Mahindra Bank, Hindustan Unilever, HDFC Bank, Axis Bank and JSW Steel also emerged as big gainers.

"Despite the reduced majority, we expect the policy agenda of Modi 2.0 (investment-led growth, capex, infrastructure creation, manufacturing, etc.) to continue, although with some tweaks.

"We also expect some populist measures to address rural stress and lift sentiments at the margin, given the nature of the verdict," a report by Motilal Oswal Research stated.

"Going ahead the narrative around Government formation and RBI monetary policy would take the centre stage in near term. Despite the reduced seats, we expect the Government focus to continue on investment-led growth, capex, infrastructure creation, manufacturing, etc in the long term," Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said.

In the broader market, the BSE midcap gauge jumped 4.41 per cent and smallcap index rallied 2.93 per cent.

All the indices ended in the green, with telecommunication soaring 6.01 per cent, services jumping 5.74 per cent, metal (5.36 per cent), auto (4.50 per cent), commodities (4.48 per cent) and consumer discretionary (4.29 per cent).

As many as 2,597 stocks advanced while 1,221 declined and 100 remained unchanged.

In Asian markets, Seoul settled with gains while Tokyo, Shanghai and Hong Kong ended lower.

European markets were trading in the green. US markets ended in positive territory on Tuesday.

Global oil benchmark Brent crude climbed 0.14 per cent to USD 77.61 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 12,436.22 crore on Tuesday, according to exchange data. Markets had the worst trading day in four years on Tuesday as the BJP fell short of the magic number for the first time since 2014.

The BSE benchmark Sensex nosedived 4,389.73 points or 5.74 per cent to settle at a more than two-month low of 72,079.05 on Tuesday. During the day, the barometer tanked 6,234.35 points or 8.15 per cent to hit a nearly five-month low level of 70,234.43.

The NSE Nifty tumbled 1,982.45 points or 8.52 per cent to 21,281.45 during the day. Later, it ended at 21,884.50, a sharp decline of 1,379.40 points or 5.93 per cent.