Strong cues from Asian markets and sustained buying by foreign investors, helped the markets to trade in green. After a firm opening, the Sensex touched its highest in two months, at 18,715.
The index finally ended near its high at 18,694 - up 201 points. NSE Nifty extended its rally and ended at 5,600 - up 55 points.
The NSE index has gained as much as 6% in the last five days.
The broader markets gained in line with the benchmark - up 0.8% each. While the mid-cap index was at 6,835, the small-cap index ended at 8,109.
Foreign Institutional investors turned buyers last week and has bought shares worth Rs 3,296.4 crore since June 23.
"Given the current scenario, we observe that there has been delivery based buying across counters. The selling in index Futures is partially due to hedging activity and some profit booking," said Shshank Mehta, Derivatives Strategist, Nirmal Bang.
Global markets were in the green ahead of the Greek Parliament's decision on austerity measures.
Greece is required to cut down on spending before recieving its next round of assistance funds.
Nikkei added 1.5% to 9,797. Taiwan, Seoul and Straits markets also went up 1% each. However, Hang Seng was flat at 22,061.
Metal stocks moved up, mirroring gains in the London Metal exchange. BSE metal index jumped 1.5% to 14,986. Jindal Saw surged 5.5% to Rs 158. Sterlite, Welcorp, Tata Steel, Sesa Goa and Hindustan Zinc advanced 2-3% each.
Market heavyweight, Reliance, gained 1.7% at Rs 885 after the recent sell off.
The stock had dropped to its 52-week low of Rs 829 a little more than a week ago after the Comptroller and Auditor General of India questioned the decision of the oil ministry to allow RIL to raise the development cost of RIL's KG-D6
FMCG sector surged in trades today on hopes of a good monsoon. The index touched an all time high of 3,976 on the back of buying in select shares.
ITC rallied to a new high of Rs 200. Colgate Palmolive, Marico, HUL and Godrej Consumer Products gained 2-7% each.
Banking, power and IT stocks were up around 1% each.
Analysts expect the markets to remain volatile in near term as traders roll over positions in the derivatives expiry on Thursday.
The market would also look at the Q1 corporate earnings for direction. The quarterly numbers are set to trickle in with HDFC on July 8 and Infosys on July 12, 2011.
India's economic growth continues to hold "untapped potential" for US firms, said Treasury Secretary, Timothy Geithner during bilateral talks between the two countries in Washington.
Wipro ended flat at Rs 420 after turning ex-dividend. The company had announced a dividend of Rs 4 per share.
Meanwhile, in a major corporate development Tata's have sought interim relief in the Singur land case after the Supreme Court directed the West Bengal government not to return Singur land to farmers till the Calcutta High Court hearing is over.
The sugar stocks were trading on a positive note after the government issued a formal order for exports of an additional 500,000 tonnes of sugar approved by a panel of ministers. Shree Renuka Sugar soared 8%, followed by Bajaj Hindusthan and Balrampur Chini Mills - up 4.3% each.
BSE market breadth was positive through the day. Out of 2,980 stocks traded, 1,789 stocks advanced while 1,053 stocks declined in trades.
