Finance Minister Palaniappan Chidambaram stuck to the expected lines in his interim budget on Monday, delivering on his fiscal deficit targets by containing expenditure, but it lacked any major policy announcements and limited itself to tax sops for some industries.
The general elections due in April-May will be the next big trigger for the markets to take any fresh calls on stocks and sectors, an analyst said.
"There won't be any significant events. We expect markets to trade range-bound with a positive bias," said Suresh Parmar, head of institutional equities at KJMC Capital Markets.
The Nifty index is expected to trade between 6,000 and 6300 in the short-term, Parmar added.
The benchmark BSE index closed 0.83 percent higher at 20,634.21, while the broader NSE index closed 0.89 percent higher at 6,127.10. Both were their highest close since Jan. 29.
The gains were also supported by strong buying by overseas investors, who bought Indian stocks worth 5.22 billion rupees ($84.3 million) on Monday, provisional data showed.
Bank shares gained 2.41 percent adding to Monday's 1.2 percent rise after finance minister announced a fiscal deficit target of 4.1 percent of the GDP, and a gross market borrowing of 5.97 trillion rupees ($96.15 billion), below market expectations.
State Bank of India gained 1.86 percent while ICICI Bank gained 2.84 percent.
Metal stocks were up on value-buying as investors bet on higher global prices and a spurt in Chinese buying.
Tata Steel gained 1.5 percent while Jindal Steel and Power closed 6.81 percent higher.
FACTORS TO WATCH
* Yen weakens as BOJ tweaks monetary policy, euro firmer
* Brent stays above $109 on US winter demand, weak dollar
* World shares get Japanese boost, yen lags
* Foreign institutional investor flows