Expectations of a marginal hike in US interest rates, along with lower crude oil prices and healthy inflows of foreign funds, lifted the key equity indices for the seventh consecutive day on Wednesday.
Additionally, investor sentiments were boosted on the back of positive global markets and the Reserve Bank of India (RBI)'s announcement of additional open market bond purchases.
Index-wise, the S&P BSE Sensex settled 137.25 points, or 0.38 per cent higher, at 36,484.33, after touching an intra-day high of 36,554.99 points and a low of 36,381.87.
The NSE Nifty50 gained 58.60 points or 0.54 per cent to close at 10,967.30.
According to Vinod Nair, Head of Research, Geojit Financial Services: "Market maintained positive momentum supported by sharp fall in bond yield and continuous infusion of liquidity by RBI via open market operation, while bearish view on oil prices added strength to the rupee.
On daily investments, provisional figures from stock exchanges showed a healthy buying trend by the Foreign Institutional Investors (FIIs), who purchased shares worth Rs 1,209.21 crore, while Domestic Institutional Investors (DII) sold stocks worth Rs 481.46 crore.
The inflow along with broadly positive global markets indicated expectations of a dovish decision by the Federal Open Market Committee (FOMC).
"Healthy foreign fund inflow and lower crude price, which is at a 52-week low, have helped the currency. The Indian rupee has been the best emerging market currency in the past week," said Anindya Banerjee, Deputy Vice President - Currency and Interest Rates, Kotak Securities.
"Indian bonds, equity and the currency have outperformed other major markets by a big margin."
HDFC Securities' Retail Research Head Deepak Jasani cautioned traders to "be prepared for some short-term corrections as the markets have been continuously running up."
"Crucial supports to watch for any weakness are at 10,928."
State Bank of India, Maruti Suzuki and ITC gained in 1-2.68 per cent range.
In contrast, Infosys lost 2.10 per cent. Export-oriented IT majors like Infosys and TCS fell in the range of 1 to 2 per cent owing to steep gains by the Indian rupee against the US dollar. Vedanta lost 0.96 per cent.
(With inputs from agencies.)