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Indian shares closed higher on Wednesday, as investors pinned their hopes on strong earnings data amid signs of cooling inflation, sending the S&P BSE Sensex above the key 60,000 level for the first time since April 5.

The NSE Nifty 50 index closed 0.67% higher at 17,944.25 while the Sensex ended 0.7% higher at 60,260.13. Both indexes clocked their highest closing level in four months.

A softening inflation has given rise to expectations the Reserve Bank of India might slow down pace and quantum of rate hikes in the coming months.

"Although the broader market is by no means cheap, it isn't prohibitively expensive either. Therefore, those looking for fundamentally strong stocks at attractive valuations could still find pockets of undervaluation," said Rahul Shah, Co-head of Research at Equitymaster.

Analysts believe domestic sentiment has been upbeat since strong corporate June-quarter results and with signs of cooling inflation, aided by softening commodity prices.

Foreign institutional investors have also been pumping money into Indian equities, having bought $2.83 billion worth of shares this month until Aug. 12, compared with an inflow of $618 million all through July, data showed.

The Nifty FMCG index rose to a record high, but pared gains to end 0.7% higher. Tata Consumer ended 0.8% higher while Hindustan Unilever gained 1.5%.

The Nifty Media index advanced 1.5%, with Zee Entertainment Enterprises up 6.1%.

Shares of Mahanagar Gas Ltd closed 1.7% lower after the company reduced prices of compressed natural gas and domestic piped natural gas in and around Mumbai.