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Indian shares closed higher on Wednesday led by a rebound in financial services stocks, with investors awaiting two key central bank events.

The Nifty 50 index settled 0.25% higher at 19,444, while the S&P BSE Sensex gained 0.33% to 65,433.30.

Gains in the Nifty were led by financial services and banks, which rose 0.92% and 1.10% respectively. Financials had fallen in eight of the last nine sessions, shedding 2.67%.

Axis Bank, ICICI Bank and State Bank of India were among the top Nifty 50 gainers, rising between 1.4% and 2.5%.

The domestically focussed mid-caps and small-caps gained 0.39% and 0.91%, hitting fresh record and 19-month highs, respectively.

The broader indexes have risen nearly 23% each in 2023 so far, compared with the 7.39% rise in the Nifty 50.

While the Nifty 50 is finding support at the 50-day simple moving average of 19,350.59, mid-cap stocks are attractive, said Anita Gandhi, director at Arihant Capital Markets.

Analysts attributed the sustained interest in mid-caps and small-caps to strong near-term returns, stable domestic macroeconomic fundamentals and earnings visibility.

Indian benchmarks are set for muted gains by the end of 2023, with a correction likely, according to a Reuters poll of equity analysts.

Among individual stocks, Larsen & Toubro hit a record high on order wins in power transmission business, while Morgan Stanley termed the company its top pick, citing strong order inflows, stable working capital and capex recovery.

Hindalco Industries rose 2.42%, the most among Nifty 50 stocks, on a 20-billion-rupee investment plan to bring new technologies to Indian Railways.

Newly-listed Jio Financial Services, meanwhile, hit the 5% lower circuit for the third session in a row.

Investors await the annual central bankers' meeting at Jackson Hole in Wyoming and the Reserve Bank of India's latest policy meeting minutes, due later this week.