Markets advanced 2% on back of short covering, and buying in IT and auto shares.
The Nifty ended up 70 points; at 5,015 and the Sensex surged 252 points, at 16,698.
Earlier in the day, the Sensex opened in the red and succumbed to selling pressure due to nervousness over Euro-zone bail-out plan.
The index changed tracks and rallied in the second half of the day due to short covering on expectations of positive news from Europe. The Nifty touched a high of 5,034
in the last leg of the trade, just before the announcement by Germany on the bailout vote.
After markets shut, the German parliament backed the extension of Euro-zone rescue fund, with 523 votes for and 85 against, which would help Greece avoid a bail out.
Ashish Chaturmohta from IIFL Wealth said, "The Greece news had led to short covering and there may be some amount of Net Asset Value propping as the September quarter ends. Nifty will see a strong resistance around 5,150 level going forward."
