Fresh buying mainly in Reliance Indusries and HDFC Bank shares pushed up both the S&P BSE benchmark sensex and CNX Nifty to hit all-time closing high at 25,962.06 and 7,751.60.
Expectations of good reform measures in the forthcoming budget also boosted the market sentiment.
Persistent foreign capital inflows into equity market coupled with overnight gains in the US market also boosted the market sentiment.
Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 950.82 crores yesterday, as per provisional data from the stock exchanges.
US stocks rose yesterday with the Dow Jones Industrial Avergae hitting record high above 17,000 for the first time and the S&P 500 index also scaling record high after the June jobs report came in much stronger than expected.
The BSE benchmark sensex opened higher at 25,844.80 and firmed up further to a high of 25,981.51 before settling at all-time closing high of 25,962.06, showing a net gain of 138.31 points or 0.54 per cent.
The NSE 50-share Nifty also moved up 36.80 points or 0.48 per cent to end at all-time closing high of 7,751.60 after hitting 7,758.00.
Major sensex gainers were Reliance Industries, HDFC Bank, Infosys, Icici Bank and ITC.
Most Asian stocks ended higher today as US jobs growth bolstered the outlook for the world's largest economy. Key benchmark indices in Hong Kong and Japan moved up by 0.06 pct to 0.58 pct while indices in China, Singapore, South Korea and Taiwan moved down by 0.03 pct to 0.19 pct.
European markets were trading lower as Germany factory orders fell more than expected in May. Key benchmark indices in France, Germnay and UK moved down in 0.06-0.13 per cent.
On the Indian markets, Jignesh Chaudhary, Head of Research, Veracity Broking Services said: "Equity markets continued to trade positive today also and posted all-time closing high. The US recovery boosted investor confidence."
Major Sensex gainers include RIL (2.47 pc), HDFC Bank (2.29 per cent), Dr Reddy's Lab (1.56 per cent), Gail (1.17 per cent), Infosys (0.88 per cent), ONGC (0.88 per cent), ICICI Bank (0.74 per cent) and BHEL (0.71 per cent).
However, Sesa Sterlite dropped 1.74 per cent, followed by Wipro 1.46 per cent and Larsen & Toubro 0.58 per cent in Sensex 11 laggards.
Dipen Shah, Head-Private Client Group Research, Kotak Securities said: "Markets closed higher on Friday but that was after a fair degree of volatility. The markets closed the week with a new high on the benchmark indices. Market sentiment was buoyed by the comments coming from the PM and FM about modernizing the railways and taming inflation, respectively."
Among the S&P BSE sectoral indices, Oil&Gas rose by 1.67 per cent, followed by Realty 1.10 per cent, Power 0.89 per cent and Bankex 0.73 per cent.
Market breadth continued to remain positive as 1,683 stocks finished with gains while 1,357 stocks ended lower.
Total turnover rose to Rs 3,862.53 crore from Rs 1,429.99 crore from yesterday.
"We believe the benchmarks would continue their positive move on Monday as well. However, volatility is key concern among the participants nowadays and it will continue to remain so due to the upcoming Union Budget," said Jayant Manglik, President-retail distribution, Religare Securities.