Markets surged to the day's high on sustained buying in IT stocks.
The Sensex, shrugged off global cues and opened on a firm note.
The index touched a high of 17,135 and finally ended up 354 points, or 2%, at 17,099.
Nifty crossed the 5,100 mark and ended up 108 points at 5,140.
In Europe, bourses opened in the red but managed to recover. The DAX jumped 1.2% to 5,481.
CAC and FTSE have gone up 0.5% each.
Asian markets ended in green with Hang Seng and Shanghai Composite gaining 0.5% each. Nikkei caught up with Monday's losses and ended down 1.6% at 8,721.
"Markets will await announcements from global developments such as the 2-day Federal Reserve meeting.
Any announcement on QE3 -- quantitative easing, or a similar economy boosting measure would lead to buying action in the equity markets.
However, a failure to do so and brewing worries in the Euro-zone could take equities further down," said Amit Chheda, Head Equity, Inventure Growth and Securities.
BSE IT index has jumped 3.2% to 5,218 on a declining rupee. Indian rupee fell to Rs 48.23, its weakest level in two years today.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a majority share of revenue from exports.
Wipro added 2.7% at Rs 351. TCS and Infosys added 3-4% each.
The company is reportedly close to acquiring the health care business of Thomson Reuters in a $700-750
Interest rate sensitive stocks rose across the board with the BSE bankex, metal, realty and auto indices advancing 1-2% each.
Reliance was the biggest contributor to the Sensex's upmove with around 51 points.
The stock jumped 3.8% to Rs 852 after its subsidiary -- Reliance Security Solutions -- and Siemens signed a memorandum of understanding to jointly develop homeland security solutions for safe, secure and smart cities and highways in India.
NTPC added 2% to Rs 172.
The company has set an ambitious target of becoming a 128,000 MW capacity firm by 2032.
Mahindra & Mahindra rose 1.7% at Rs 814 after reports suggested that Ssangyong Motor Co, in which M&M is a majority shareholder, aims to expand vehicle sales volume and revenue by a third in 2013 from this year by launching five improved models and lifting overseas sales.
Among individual stocks, shares of gems and jewellery sector such as Rajesh Exports, Shrenuj & Co, Shree Ganesh Jewellery and Su-raj Diamonds and Jewellery rallied 7-12% on the bourses ahead of the festive season on hopes of higher demand.
DAG stocks hogged the limelight with Relcapital, Rpower and Rcom up around 4%-5% each.
Meanwhile, ONGC dropped 2.8% to Rs 262. BHEL was down 0.8% at Rs 1,643. The company said it would ramp up its manufacturing capacity to 20,000 MW by March 2012.
BSE market breadth was positive. Out of 2,916 stocks traded, 1,832 stocks advanced while 952 stocks declined.
