The BSE Sensex rose to record highs for a fourth straight session on Thursday, as state-run lenders including State Bank of India (SBI) extended recent gains on broker upgrades and on hopes of some easing at the central bank's policy review on Tuesday.
Higher rollovers on an absolute basis coupled with high roll cost during the expiry of March derivative contracts also lent support and indicates market participants are bullish for the April series, dealers added.
Besides the Reserve Bank of India's policy review on April 1, where it is widely expected to keeps rates unchanged, investors say the forthcoming general elections would act as the next key catalyst for markets.
Overseas investors have helped underpin gains, with net purchases in shares reaching $2.75 billion so far this month, according to regulatory data.
"Profit-booking cannot be ruled out, but it remains a buy on dips due to flows and macro improvement," said Deven Choksey, managing director at K R Choksey Securities.
"Also, India's central bank may ease the rates a bit on April 1 in support of foreign investors."
The Nifty rose as much as 1.1 per cent to an all-time high of 6,673.95, while the Sensex gained 0.96 per cent to a lifetime high of 22,307.74.
The Sensex closed 0.54 per cent higher, while the Nifty ended up 0.61 per cent.
Shares in state-run banks gained after Goldman Sachs upgraded the stocks, saying neglected lenders are poised for a rally on emerging macroeconomic and political clarity.
State Bank of India rose 3.9 per cent, Punjab National Bank ended higher 3.8 per cent, and Bank of Baroda gained 2.4 per cent.
Non-banking state-run infrastructure lender IDFC Ltd also rose 5.2 per cent.
Other blue chips also rose: Reliance Industries gained 1.1 per cent, while ITC ended 0.2 per cent higher.
Airline shares gained after the central bank on Wednesday extended the deadline for raising working capital via external commercial borrowings by domestic airlines to March 2015 from December 2013.
Jet Airways (India) Ltd, the country's No.2 airline by domestic market share, gained 2.6 per cent, while SpiceJet Ltd surged 3.5 per cent.
Talwalkars Better Value Fitness Ltd surged as much as 12.8 per cent to 182.40 rupees, its highest in more than 13 months, after the Economic Times daily reported UK health and fitness group The David Lloyd is looking to buy around 20 per cent in the company, citing two people familiar with the matter.
The stock ended 8 per cent higher after the company said in a clarification to exchanges that there have been no negotiations for sale of any equity.
However, exporters continued to fall on fears of margin erosion as the rupee was holding around its eight-month high.
Among pharmaceutical exporters, Sun Pharmaceutical Industries Ltd fell 1.1 per cent and Dr.Reddy's Laboratories Ltd lost 1.7 per cent.
In software stocks, Infosys Ltd fell 0.55 per cent and HCL Technologies Ltd ended 0.6 per cent lower.