The Sensex, which had gained over 130 points in last two trading sessions, rose further by 193.75 points, or 1.04 per cent to 18,755.45 -- the highest since October 25 when it ended at 18,758.63.
Around 26 stocks in the 30-share index closed with gains led by Gail, Bajaj Auto, L&T and ICICI Bank.
The wide-based National Stock Exchange index Nifty rose by 52.65 points, or 0.93 per cent, to close at 5,697.70.
"...Positive US economic data released recently boosted the buying. Indian market breadth was positive and volumes were also higher. European and Asian indices also traded higher and underpinned the positive sentiment," said Nidhi Sarswat, Senior Research Analyst, Bonanza Portfolio.
Brokers also said trading sentiment was bolstered after IT major Wipro reported 23.8 per cent growth in consolidated net profit for the second quarter ended September 30.
Its shares, which closed one per cent higher, helped improve sentiment in the IT pack with TCS and Infosys also up over 1 per cent each.
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Capital goods stocks, including L&T and Bhel, were among the best performers on the back of foreign funds flow while realty, auto and metal stocks also scored gains.
Besides, a firming trend on the Asian bourses and a higher opening on the European markets eyeing robust US jobs and manufacturing data later today, also triggered buying activity on the domestic boures, they said.
The BSE capital goods sector index topped the sectoral charts todat with a rise of 1.74 per cent. All the 13 sectoral indices closed with gains.