The BSE Sensex rose for the third straight session on Monday, closing 39 points higher at an over one-week high on buying in power, capital goods and healthcare shares, amid hopes of higher capital inflows.
Markets were seen ignoring sharp losses in the rupee which plunged over 1.6 per cent to 64-levels against the US dollar.
Brokers said the trading sentiment was firm after the finance ministry said steps to attract capital flows to fund the current account deficit (CAD) can be expected within a week.
The 30-share Sensex, which had gained over 613 points in last two sessions, advanced further by 38.69 points, or 0.21 per cent, to 18,558.13, after touching day's high of 18,728.19. Monday's close is the highest since August 16 (18,598.18).
Similarly, the broad-based National Stock Exchange index Nifty climbed to 5,528.70, before ending higher by 4.75 points, or 0.09 per cent, at 5,476.50.
Also, SX40 index, the flagship index of MCX-SX, closed 60.45 points up at 11,021.18.
In the Sensex pack, 19 stocks gained while 11 stocks ended with losses. Major gainers were Infosys, RIL, L&T, BHEL, Dr Reddy's, Hero MotoCorp, HUL, NTPC and Jindal Steel.
Among star performers on Monday, Sesa Goa spurted by 9.39 per cent to Rs 167.25 ahead of its inclusion in Sensex on Tuesday while L&T gained 0.79 per cent to Rs 744 as reports said foreign brokerage Barclays upgraded the stock to "overweight".
Hexaware Technologies rose 6.13 per cent to Rs 128.15 after Baring Private Equity Asia agreed to buy a controlling stake in the Indian outsourcing service provider.
Sectorally, the power sector index gained the most by rising 1.56 per cent to 14,019.50, followed by capital goods index by 1.25 per cent to 7,325.85. Healthcare index rose by 1.12 per cent to 8,757.50 and metal index by 1.05 per cent to 7,898.57.
A firming global trend - after a slump in US home sales eased speculation that the US Federal Reserve will reduce economic stimulus next month - further supported domestic markets.
With the general improvement in the trading sentiment, speculators were seen covering their pending short positions created in the recent past, which also remained a positive factor for the market, brokers added.
With inputs from PTI