Thawing of Ukraine crisis and upbeat economic data from China helped domestic markets, said traders.
After gaining 263.08 points in the previous session, the BSE Sensex advanced 67.13 points, or 0.32 per cent, to end at 21,276.86, a fresh six-week high.
At this level, the index is just 100 points away from its record closing high of 20,376.56 on February 7.
ICICI Bank, whose shares jumped 2.7 per cent, alone contributed about 41 points to BSE Sensex's 67.13-point rise.
Seventeen stocks gained in 30-share Sensex while 13 ended lower. Major Sensex gainers include SBI, Infosys, Axis Bank, HDFC, Maruti Suzuki, L&T, ONGC, Sun Pharma and Cipla.
The 50-share NSE index Nifty crossed key 6,300 level by adding 30.70 points, or 0.49 per cent, to end at 6,328.65.
"Strength in global markets and positive economic data from China has boosted market sentiment. Sentiment shall also be impacted pre-elections and market may continue to show volatility ahead of the main elections time," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.
Election Commission announced dates for the high-stakes Lok Sabha elections to be held between April 7 and May 12.
Market sentiment remained bullish for the second day as fears of an imminent military conflict in Ukraine eased.
Overseas investors bought Indian shares worth Rs 185 crore yesterday, their eleventh straight day of buying, analysts said.
Sectorally, the BSE Realty sector index gained the most by rising 1.95 per cent, followed by Banking index (up 1.47 per cent), Capital Goods index (1.13 per cent) and Metal index (0.68 per cent).
* BSE index gains 0.32 pct; NSE ends 0.49 pct higher
* As India sets election dates, traders brace for stocks rally
* Bharti Infratel jumps on tower sharing pact
India's BSE edges up near record closing high; blue-chips surge
(Reuters) India's benchmark BSE index gained 0.3 percent on Wednesday to approach a record closing high hit last month, extending a recent rally as continued buying by foreign investors boosted stocks of blue chip companies such as ICICI Bank.
Overseas investors bought Indian shares worth 1.85 billion rupees ($29.9 million) on Tuesday, extending their buying streak to a 13th consecutive day for a net of about $800 million.
Indian shares were also helped by gains in other Asian markets as a semblance of calm returned after two days of intense volatility with the United States and Russia set to hold talks on easing tensions in Ukraine.
Hopes of a pre-election rally are also expected to help sentiment as shares usually rise a month before the polls begin. Polling will kick off on April 7 and go on until May 12, India's election commission said on Wednesday.
"It is important to see how the markets progress ahead of elections as we have been struggling for sustainability at higher levels for quite some time. However, the situation is in favour of bulls this time so one should continue to uphold long positions and avoid contrarian approach," said Jayant Manglik, President at Religare Securities Ltd.
The benchmark BSE index rose 0.32 percent, or 67.13 points, to end at 21,276.86, near its Jan. 23 record closing high of 21,373.66.
The broader NSE index gained 0.49 percent, or 30.70 points, to end at 6,328.65, above the psychologically important 6,300 level.
Banks were among the leading gainers, with the NSE sub-index advancing 1.6 percent, helped by hopes that data next week will show continued easing in inflation, allowing the central bank to keep interest rates on hold.
ICICI Bank Ltd rose 2.8 percent and Axis Bank gained 1.1 percent.
Among state-owned banks, Bank of Baroda Ltd surged 6.3 percent while Punjab National Bank ended 4.6 percent higher.
Among other interest rate-sensitive stocks, India's biggest realty developer DLF Ltd rose 3.5 percent while non-banking finance lender, IDFC Ltd, gained 3.2 percent.
Mahindra and Mahindra Financial Services Ltd rose 1.9 percent after Goldman Sachs upgraded the stock to "buy" from "neutral", citing valuations and "overly pessimistic" market expectations on the non-banking financial firm's loan growth and profitability.
Bharti Infratel gained 5.9 percent after the company entered into a tower sharing pact with Reliance Jio Infocomm, Reliance Industries' telecom unit.
However, Reliance Communications fell 0.5 percent after the Bharti Infratel and Reliance Jio Infocomm pact.
Astrazeneca Pharma India Ltd fell 5.3 percent on profit-taking ahead of the company's board meet later in the day to consider a proposal by promoter AstraZeneca Pharmaceuticals AB (AZP AB) Sweden to delist the company.
FACTORS TO WATCH
* Yen extends drop as Russia-Ukraine concerns ebb
* Brent oil falls for 2nd day, Crimea rally gains wiped
* Asian shares gain as Ukraine fears ease
* Foreign institutional investor flows