The 30-share index, which had gained 356 points in the last two trading sessions, advanced further by 130.05 points, or 0.65 per cent to 20,160.82. This is Sensex's highest closest since May 20.
The broad-based National Stock Exchange index Nifty regained a crucial 6,100 level by rising 28.10 points, or 0.46 per cent, to 6,111.25.
Also, the MCX-SX flagship index SX40 closed higher by 51.64 points, or 0.43 per cent, at 11,947.27.
A firming Asian trend and higher opening in Europe as investors awaited reports that may show US consumer confidence and house prices increased, further boosted the trading sentiment.
Also Read
CIL rose by 3.01 per cent (pc) to Rs 322.95 after posting higher fourth-quarter profit and coal price hike, while index- heavy Reliance Industries advanced by 1.80 pc to Rs 843.115, added to yesterday's 5.3 pc gain after it announced a "significant" gas discovery.
Out of the 30 Sensex components, 19 stocks ended with gains led by Hero MotoCorp, BHEL and Coal India gaining 5.09 pc, 3.30 pc and 3.01 pc, respectively.
Among other stocks, shares of gold loan firms Muthoot Finance and Manappuram Finance were down after the Reserve Bank imposed restrictions for providing loans against gold coins as well as units of gold ETFs.
In sector-wise indices, the oil and gas sector index gained the most by rising 1.65 pc to 8,950.96, followed by auto index by 1.33 pc to 11,076.54.