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The Reserve Bank of India in its third quarter monetary policy review Tuesday cut the key interest rates for the first time in nine months in an attempt to boost the economic growth. Reuters

India's BSE Sensex rose Wednesday following positive cues from Asian markets and the rupee gaining.

The Sensex was up by 202.32 points, or 1.26 percent, to reach 16,222.96. The Indian rupee opened higher Wednesday against the dollar at 55.44 after ending at 55.64 Tuesday.

All sectoral indices were trading in green and leading the gain in Sensex were stocks of banks, technology and metal. Major gainers are State Bank of India (1.81 percent), Wipro Ltd (1.23 percent) and Tata Steel (1.46 percent).

Investor confidence was positive in Asian markets with Japan's Nikkei index, Hong Kong's Hang Seng index and South Korea's Kospi trading higher. The positive economic data from the U.S. and the G7 meeting's promise to work closer to tackle economic problems have helped boost investor sentiments. The market response was positive as the outcome of the U.S. May ISM nonmanufacturing index came as a relief, with the index rising to 53.7 from 53.5.

Finance ministers from the Group of Seven had a teleconference Tuesday, during which they decided to jointly sort out the economic concerns in Spain and Greece. Investors are also focusing on the Wednesday meeting of the European Central Bank that has on its agenda factors affecting its interest rate decision and the overall economic outlook and inflation.

The market improved this week as the rupee strengthened to a certain degree after falling to a record low of 56.52 against the dollar last week. Investors are also confident that the Reserve Bank of India will intervene to ease the monetary policy and, in turn, boost economic growth. Investor concerns were raised last week after it was reported that India's economic growth slumped to 5.3 percent in the fourth quarter ending March 31, which is a nine-year low.

Comments by Union Finance Minister Pranab Mukherjee and RBI Deputy Governor Subir Gokarn this week on India's financial condition and possibilities for monetary policy easing, respectively, have also helped strengthen investor confidence.