After two straight sessions of losses, the NSE Nifty 50 index settled 0.76% higher at 19,133.25, while the S&P BSE Sensex rose 0.77% to 64,080.90.
The more domestically focused small- and mid-caps also gained over 1.3% each.
The Fed held interest rates steady, as was widely expected, on Wednesday, with Chair Jerome Powell saying inflation had been coming down.
“Fed’s commentary was not hawkish as the market feared,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
“Powell’s comments on inflation were slightly dovish, implying that the central bank may not hike rates again in this cycle.”
That sent the benchmark US 10-year bond yield to a two-week low, which, analysts said, boosts the allure of Indian equities to foreign investors, who have recently been piling out.
Foreign portfolio investor (FPI) selling in Indian shares hit a nine-month high in October, dragging the blue-chip Nifty 50 to its worst month in 2023.
All 13 sectoral indexes advanced on the day.
IT companies, which are much more sensitive to US interest rates than other stocks given a high concentration of US clients, rose 0.78%.
Forty-two of the Nifty 50 stocks logged gains. Britannia Industries gained 2.96% after topping profit estimates in the September quarter.
Gas distribution company GAIL jumped 3.91%. Dabur India settled 2.57% higher after the consumer goods company beat quarterly profit estimates, supported by strong demand.