The 30-share index rebounded by 123.37 points, or 0.36 per cent, to 33,916.75. The gauge had lost 263.45 points in the previous three sessions.
Sectoral indices led by infrastructure, capital goods, PSU, realty and metal were leading the recovery, adding up to 0.70 per cent.
The NSE Nifty also moved up by 26.90 points, or 0.25 per cent, to trade at 10,470.10.
Brokers said continued foreign fund inflows and gains at most of Asian markets influenced trading sentiments here.
Foreign institutional investors bought equities worth Rs 96.31 crore on Wednesday, while Domestic Institutional Investors (DIIs) sold shares worth Rs 269.20 crore, as per the provisional data.
In the Sensex kitty, major gainers included Asian Paint, ONGC, IndusInd Bank, Dr Reddy's, TCS, Maruti Suzuki, L&T, Axis Bank, SBI, ITC Ltd, HDFC Bank, M&M, NTPC and Reliance Industries, gaining up to 1.38 per cent.
In Asia, Hong Kong's Hang Seng rose 0.47 per cent while Shanghai Composite index up 0.41 per cent in early trade on Thursday. Japan's Nikkei began the first trading day of 2018 on a strong note by rising 2.46 per cent, trying to catch up with recent rallies on Wall Street.
The US Dow Jones Industrial Average ended 0.40 per cent higher on Wednesday.