Sensex at 3-week high

The BSE Sensex rose more than a per cent on Wednesday, marking its highest close in nearly three weeks as the September trade deficit narrowed sharply, raising hopes for a significant improvement in the current account balance.

The Sensex rose 1.3 per cent, or 265.65 points, to 20,249.26, marking its highest close since September 20.

The broader Nifty advanced 1.3 per cent, or 79 points, to 6,007.45, closing above the psychologically important 6,000. Lenders such as HDFC Bank led the rise as the data was seen supporting the rupee and potentially reducing exchange rate-led inflation pressures and the prospect of extra repo rate rises.

Still, traders remain largely cautious given the continued standoff over the U.S. budget, while blue chips at home are gearing up to report September-quarter earnings, starting with Infosys on Friday.

"Trade data has definitely highlighted a bright spot for the Indian economy. RBI's actions alongside results would determine the market's direction from here onwards," said Deven Choksey, managing director at K R Choksey Securities.

The NSE bank index rose 1.9 percent after falling as much as 1.9 percent after the September trade deficit came in better than expected. The deficit for the month stood at $6.7 billion, the lowest level since March 2011, compared with $10.9 billion in August.

HDFC Bank rose 2.6 percent, while ICICI Bank Ltd (ICBK.NS: Quote, Profile, Research) ended up 1.4 percent.