After a weak start, the 30-share index gained 110.69 points, or 0.53 per cent, to settle at 20,811.44 points, a level last seen on January 24.
Brokers said market remained bullish since last week after the government announced several measures to contain fiscal deficit and highlighted diminishing price pressures in its interim budgetary proposals.
The current rally was backed by banking and capital goods sectors on expectations that improving economic growth might boost the corporate earnings, they said.
The broad-based National Stock Exchange index Nifty rose by 30.65 points, or 0.50 per cent, to 6,186.10, after touching an intra-day low of 6,130.80.
Engineering major Larsen & Toubro rose by 2.85 per cent after its subsidiary L&T Infrastructure Development Projects secured FIPB approval for FDI worth Rs 1,000 crore. Power equipment maker BHEL too jumped 3.95 per cent on increased investment buying.
Among banking stocks, Axis Bank rose by 3.96 per cent, ICICI Bank by 0.91 per cent and HDFC Bank by 1.44 per cent, pushing the banking index up by 1.19 per cent to 12,192.66.
In 30 Sensex stocks, 22 closed with gains. Tata Power was the top performer on the benchmark surging by 5.02 per cent after power regulator CERC allowed it to raise tariff and as well as seek compensation of around Rs 330 crore.
Outside the index, ICRA shot up 19.41 per cent to Rs 1,913 after Moodys made an offer to raise its stake in the credit-ratings agency.
In global markets, Asian stocks lost ground while Europen market opened weak.
* BSE index gains 0.53 pct; NSE ends 0.5 pct higher
* Info Edge at record high on Facebook-WhatsApp deal
* NTPC plunges to over 5-yr low on electricity pricing rules
Indian shares end at 1-month high; foreign flows support
(Reuters) - Indian shares rose for a second consecutive session on Monday to a one-month high as blue chips, including banks gained on continued optimism around foreign-investor buying even as rising global uncertainties hit other Asian markets.
It was a mixed day for power utilities, with Tata Power Co Ltd surging to a nearly 1-1/2 month high after the regulator allowed it to raise tariffs, although NTPC plunged to a more than 5-year low as the order was seen as negative for the state-run firm.
Indian equities are expected to remain supported as overseas investors have been net buyers of nearly $430 million over the last eight sessions, helping ease some of the concerns in a year dominated by worries about the U.S. Federal Reserve's tapering of its monthly bond buying and the outlook for China's economy.
"Foreign buying is supportive, so while markets may remain range-bound from hereon, stock-specific moves will continue," said Paras Adenwala, managing director and principal portfolio manager at Capital Portfolio Advisors.
The benchmark BSE index rose 0.53 percent, or 110.69 points, to end at 20,811.44.
The broader NSE index rose 0.5 percent, or 30.65 points, to end at 6,186.10. Both indexes marked their highest close since Jan. 24.
Among blue chip stocks, Axis Bank rose 3.8 percent, while Larsen and Toubro ended 2.8 percent higher.
Tata Power Co Ltd closed up 5.1 percent after the federal power regulator said it could raise tariffs for electricity from its plant in Mundra in India's Gujarat state, a decision also likely to boost its earnings outlook.
Pfizer Ltd surged 9.7 percent after earlier marking its highest intraday level since Dec. 9, after the company said a unit of its parent Pfizer Inc will buy close to a 61 percent stake from two other units after an internal restructuring.
Info Edge India Ltd shares ended 1.8 percent higher. It earlier hit its all-time high of 708.05 rupees on news Facebook Inc's $19 billion offer for mobile-messaging startup WhatsApp was seen raising valuations for internet-based companies.
Icra Ltd shares rose 20 percent, its maximum daily limit, after largest shareholder Moody's Corp, announced a conditional open offer to acquire up to 2.6 million shares in it at 2,000 rupees a share for about $84 million.
However, shares of another Indian rating agency Credit Analysis and Research Ltd fell 8.4 percent after the company said bids for a share sale by stakeholders were rejected "after no bid was found acceptable".
NTPC Ltd also slumped 11.8 percent, after earlier marking its lowest level since Oct. 27, 2008, after the electricity regulator tightened incentives on capacity utilisation and tax treatments for the state-owned company, according to analysts. FACTORS TO WATCH
* Euro rises to day's high versus dollar after German IFO
* Brent rises above $110 on hopes for revived demand
* Shares sag as China market sputters, yen recovers
* Foreign institutional investor flows