Sensex surged by almost 120 points in early trade on Tuesday amid optimistic buying by investors ahead of RBI policy review scheduled for Wednesday.
Firm Asian cues tracking record closing in the US as worries on Italy's political uncertainty faded, bolstered sentiment.
Rising for the second straight day, the 30-share index was trading higher by 119.88 points, or 0.45 per cent, to 26,468.98, with realty, power, oil and gas, capital goods, PSU and IT stocks leading the gains.
The gauge had gained 118.44 points in the previous session. The NSE Nifty also gained 45.30 points, or 0.55 per cent, to 8,174.05.
Brokers said that raising of bets by investors and domestic institutional investors ahead of RBI's bi-monthly monetary policy review and a firming trend at other Asian markets added to the positive mood.
Among other Asian markets, Hong Kong's Hang Seng was up 0.75 per cent while Japan's Nikkei surged 0.52 per cent in early trade on Tuesaday. Shanghai Composite too rose 0.08 per cent. The US Dow Jones Industrial Average ended 0.24 per cent higher in yesterday's trade.