Mumbai: The last hour of trading at bourses pulled equity indices off the day's high but ended in positive terrain with Sensex closing above the 40,000-mark for the first time since July 5.

Positive sentiment prevailed in the market as investors across the globe awaited the decision of US Federal Reserve on interest rates later in the day.

Also read: Indian rupee opens lower by 11 paise against US dollar in early trade 

At home, the upbeat mood also stemmed reports that the dividend distribution tax may be scrapped shortly.

The BSE S&P Sensex closed 220 points or 0.5% higher at 40,052 while the Nifty 50 edged higher by 57 points to 11,844.

Sectoral indices at the National Stock Exchange were mixed with Nifty PSU bank up by 3.7%, IT by 1.4% and FMCG by 1%.

Among stocks, energy major GAIL was a prominent winner with gains of 6.3% at Rs 133.80.

 IndianOil too showed gains of 1.9% after Prime Minister Narendra Modi said a day earlier that India will invest $100 billion in oil and gas infrastructure to meet energy needs of an economy that is being targeted to nearly double in five years.

The country's largest lender State Bank of India edged higher by 3.4% to Rs 290.40 per share. Besides, Tata Consultancy Services, ITC, Nestle India, Bharti Airtel and Eicher Motors showed modest profits.

 However, Bharti Infratel closed 5.2% lower after witnessing gains during the morning session. Yes Bank, Cipla, Maruti and Britannia too closed in the red.

 Meanwhile, Asian stock markets traded in the negative zone as the prospect of a rate cut by the US Fed was countered by worries that the US-China first-stage trade deal could be delayed.

 Japan's Nikkei slipped by 0.57% while South Korea's Kospi traded down by 0.59%. The Shanghai Composite fell by 0.50% and Hong Kong's Hang Seng index dipped by 0.44% (ANI)