The Nifty50 rose by 55.40 points, or 0.56 per cent, to close at 9,914.90 points, while the Sensex closed at 31,671.71 points - up 174.33 points, or 0.55 per cent.
The 30-share index rebounded by 222.33 points, or 0.7 per cent, to 31,814.36.
Positive global cues with most other Asian markets ending higher, tracking another record close on Wall Street following more buoyant U.S. data and hopes for tax reform, fuelled the rally.
This is the highest closing since September 22 when it settled at 31,922.44.
The Nifty opened higher at 9,908.15 and moved in a range of 9,989.35 and 9,906.60 before ending at 9,979.70, up 91.00 points, or 0.92 per cent, from its last close.
At 11.20 AM: Sensex zoomed 219 points or 0.69% at 31,811.48 while the wider Nifty was up by over 76 points or 0.78% at 9,965.45.
Domestic institutional investors (DIIs) bought shares worth a net Rs 519.03 crore, while foreign fund outflows stood at Rs 656.50 crore yesterday, according to provisional data from exchanges.
Big gainers in the Sensex kitty included Tata Steel, GAIL India, JSPL, NTPC and SBI - rising between 2.2 per cent and 4 per cent.
Losers were Bharti InfraTel, Hero MotoCo, HDFC, Dr Reddy's, IndusInd Bank, Zee, Power Grid, M&M and Cipla. Reflecting the widespread recovery, all the sectoral indices led by consumer durables, metal and oil and gas were trading in the green, adding up to 1.01 per cent.
Nifty PSU Bank index recovered from previous losses to end at 3,101.90, up 2.07 per cent.
The broader markets too showed a bullish trend, with BSE small-cap and mid-cap indices surging up to 1.09 per cent. Financial markets in China remained shut today for a public holiday.