The S&P BSE Sensex rebounded 258 points on Wednesday amid positive global cues ahead of the two-day meeting of US central bank on 16 and 17 September.

The Sensex ended 1% higher at 25,963 points, while the 50-share Nifty rose 70 points, or 0.89%, to close at 7,899 points.

"Market participants will anxiously look forward to the Fed meet. Should the Fed choose not to do anything, it has two more occasions this year for imposing the rate hike. The Fed event aside, we cannot ignore the macro-economic tailwinds on the fiscal and current account fronts," said Amar Ambani, head of research, IIFL.

"Technically, Nifty managed to successfully sustain above the neckline of the bullish inverted head and shoulder pattern which indicates that we are heading towards the 8100 mark in the near term," he said.

The rebound in Indian markets was partly led by a sharp rally in other Asian stock markets. While the China's Shanghai Composite index surged 4.9% to close at 3,156 points, Hong Kong's Hang Seng index rose 3% to 21,998 points. Japan's Nikkei also gained 1% to end at 18,172 points.

Improvement on the inflation front has been raising expectation of interest rate cut by the Reserve Bank of India (RBI) at this month's meeting, which also boosted the investors' sentiment. The consumer price index (CPI) fell to 3.66% in August.

However, an official data showed that the country's exports fell for the ninth consecutive month in August. India's exports slumped by over 20% to $20.26 billion in the month.

Bharti Airtel, Sun Pharma, Axis Bank, Vedanta and Hero MotoCorp were the top gainers among the Sensex stocks, while BHEL, Larsen & Toubro, ACC and Reliance Capital were the top losers.

Among the sectoral indices, bankex was the top gainer ending 1.4% higher, followed by consumer durables and capital goods.

Banking stocks Axis Bank, HDFC Bank, ICICI Bank and SBI gained between 1% and 2.5%.

"We expect Bank Nifty to lead the upswing from here on. Private banks like ICICI Bank, Axis Bank, IndusInd Bank and PSU heavyweights like SBI and Bank of Baroda are the preferred picks," Ambani said.

Meanwhile, investors are closely monitoring the two-day meeting of the US Federal Reserve on Wednesday and Thursday. A rate hike by the bank is likely to trigger heavy capital outflows from emerging markets including India.

"The market's eagle eye is clearly and collectively focused on the US Federal Reserve and the possibility that the FOMC could raise the Fed Funds rate from near zero, a point at which the Fed has held rates since 2008," said Rabobank in a note.

Gold prices remained weak going into Fed meeting. The yellow metal prices were down Rs 25 to Rs 26,325 per 10 gm. Silver prices rose Rs 200 to Rs 34,300 per kg on the back of improved demand from industrial units and coin makers.

Rupee also ended down by 9 paise to 66.46 against the US dollar amid concerns over a possible interest rate rise by the US central bank. A rate increase by the bank could weigh on emerging market currencies including the Indian rupee.