 "Market cheers GDP data; Sensex at 6-mth high, zooms 241 points")
The impact was such that even the broader NSE Nifty took back the 8,900-mark.
The Central Statistic Office (CSO) on Tuesday showed that GDP expanded by 7 per cent in the third quarter, belying all fears of the note ban derailing economic activity. It also retained its first advance growth estimate for the fiscal at 7.1 per cent.
The Sensex took off on a positive note and went past the key 29,000-mark to touch a high of 29,029.17 before settling up by 241.17 points, or 0.84 per cent, at 28,984.49, a level last seen on September 8 last year when it had closed at 29,045.28.
The gauge had lost 149.65 points in the previous two sessions.
The NSE Nifty also moved up 66.20 points, or 0.75 per cent, to 8,945.80 after shuttling between 8,960.80 and 8,898.60.
A monthly PMI survey showed that India's manufacturing sector grew for the second straight month in February.
Meanwhile, US President Donald Trump, in his address to the Congress, took a more measured tone, saying he is open to immigration reforms.
Moody's Investors Service said demonetisation will be credit positive for India as it is likely to reduce tax avoidance and corruption, which cheered market players.
"A surprise growth of 7.1 per cent in third quarter GDP data and no negative comments in Trump's speech have given a renewed buying interest in the market. The impact of cash crunch seems over-estimated. Prima facie, the February auto sales numbers are looking better as discretionary spending is gradually picking up," said Vinod Nair, Head of Research, Geojit Financial Services.
Both the key indices have rallied by almost 9 per cent in the past two months, largely on the back of a growth-oriented Budget, better-than-expected earnings from bluechip companies and strong global cues.
The government pegged GDP growth at a higher-than-expected 7.1 per cent for 2016-17 despite the cash blues, with manufacturing and agriculture doing exceptionally well, which in turn made India keep the tag of the world's fastest-growing large economy.
Better Chinese factory readings led to a higher closing in Asia and a better opening in Europe.
Stocks of automobile companies led by M&M, Hero Motocorp and Bajaj Auto were in limelight and gained up to 3.13 per cent largely on the back of encouraging sales numbers for February.
Other prominent gainers included Tata Steel, Dr Reddy's, ITC, Sun Pharma, HDFC, Axis Bank, Infosys, SBI, Hindustan Unilever, ICICI Bank, Power Grid and Cipla, rising by up to 3.66 per cent.
Out of the 30-share Sensex pack, 21 ended higher while 9 led by GAIL, NTPC, Tata Motors, Bharti Airtel, RIL, Coal India, Lupin and Wipro ended lower, which limited the gains.
The BSE realty index gained the most by surging 3.46 per cent, followed by metal 1.91 per cent, FMCG 1.30 per cent, bank 0.96 per cent and healthcare 0.87 per cent.
In step with the trend, the small-cap index rose 0.45 per cent and mid-cap 0.13 per cent.
Meanwhile, foreign investors bought shares worth Rs 1,146.23 crore on Tuesday, showed provisional data.
In Asia, Hong Kong's Hang Seng rose 0.15 per cent and Japan's Nikkei up 1.44 per cent while Shanghai Composite Index was up 0.16 per cent.
In Europe, London's FTSE was up 0.61 per cent, Paris' CAC 40 1.11 per cent and Frankfurt's DAX 30 1.14 per cent in their early deals.
The market breadth indicating the overall health of the market was positive as 1,647 stocks ended higher, 1,199 declined and 197 ruled steady.
The total turnover at BSE fell to Rs 3,816.09 crore, from Rs 4,988.27 crore on Tuesday.
In Europe, London's FTSE was up 0.61 per cent, Paris' CAC 40 1.11 per cent and Frankfurt's DAX 30 1.14 per cent in their early deals.
The market breadth indicating the overall health of the market was positive as 1,647 stocks ended higher, 1,199 declined and 197 ruled steady.
The total turnover at BSE fell to Rs 3,816.09 crore, from Rs 4,988.27 crore on Tuesday.