Stocks rose for the first time in five days as market benchmark Sensex rebounded from around three-week lows by rising 331 points to 26,726.34 and the NSE Nifty regained the crucial 8,200-mark on value buying in recently beaten-down stocks amid firm global cues.

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Optimistic buying by investors on hopes Parliament will approve the long-pending Goods and Services Tax bill (GST) in the upcoming monsoon session also helped. In addition, the rupee supported the recovery as it gained 20 paise to 67.07 during intra-day trade against the dollar.

Still, sentiment remained broadly cautious ahead of the US Federal Reserve's policy decision today and Brexit referendum next week.

The 30-share Sensex after opening higher at 26,500.79 stayed in the positive terrain through out the day and hit the day's high of 26,752.59 before finally settling 330.63 points or 1.25 % higher at 26,726.34. The gauge had lost 625 points in the last four days.

The 50-share NSE Nifty bounced back by 97.75 points or 1.21 % to 8,206.60. Intra-day, it climbed to a high of 8,213.20.

Airlines took the centrestage after the Cabinet cleared the much-awaited civil aviation policy that seeks to strengthen regional connectivity and tap the sector's growth potential.

Shares of Spicejet soared 3.51 % to Rs 66.40, InterGlobe Aviation rose by 1.90 % to Rs 1,008 and Jet Airways gained 0.21 % to Rs 561.

Shares of SBI topped the gainers list, rising 3.90 % to Rs 215.65 on reports of the Centre's approval to its five associate banks with the lender.

State Bank of Bikaner and Jaipur and State Bank of Tranvancor rallied 20 % each to hit upper limit of Rs 599.60 and Rs 478.90, respectively.

Other major gainers were NTPC, L&T, Bharti Airtel, Maruti Suzuki, Hero MotoCorp, ITC Ltd, Bajaj Auto, GAIL, Tata Steel, Cipla, Asian Paint, HDFC Bank, ICICI Bank, Infosys, BHEL and Hindustan Unilever, rising by up to 3.88 %.

Broader markets were too in better form with small-cap and mid-cap indices rising by up to 0.80 %.

Overseas, Europe was higher as the US Fed looked set to postpone interest rates hike as Brexit vote clouded outlook. Key indices from the region like France, Germany and the UK moved up by up to 1.22 %. Asian stocks rebounded with key indices in Hong Kong, Japan and Shanghai rising up to 1.58 %.

Among BSE sectoral indices, capital goods rose the most by 2.26 % followed by power 1.99 %, PSU 1.63 %, banking 1.38 %, infra 1.25 % and oil&gas 1.14 %.