Besides, encouraging June quarter earnings by several blue-chip companies and positive global cues tracking strong Chinese economic data, also bolstered domestic sentiments.
After moving in a range for the major part of session as investors adopted a cautious stance, the 30-share Sensex climbed to new intra-day high of 26,292.66 points, bettering previous peak of 26,190.44 hit on July 8.
Boosted by robust buying in metal, FMCG and IT shares, the BSE index settled for the day at 26,271.85 -- a new record at closing -- gaining 124.52 points or 0.48 per cent. Its previous record closing high was 26,147.33 reached yesterday.
Heavyweights ITC, Infosys and Reliance Industries supported the rise.
In eight days, its longest winning streak since September 2012, the gauge has now rallied 1,265 points. The Sensex has increased 24 per cent this year so far, the best among major global markets, as FIIs have pumped USD 11 billion in shares.
The 50-scrip NSE Nifty closed above the 7,800-mark for the first time at 7,830.60, rising 34.85 points, or 0.85 per cent. The broader index touched intra-trade record high of 7,835.65, surpassing previous record of 7,809.20 (July 23).
The Cabinet today gave go-ahead to FDI cap hike in insurance to 49 per cent, paving way for inflow of as much as Rs 25,000 crore foreign funds. Yesterday, the RBI said the FII limit for investment in government securities has been hiked by USD 5 billion within the total cap of USD 30 billion.
Stocks of Insurers such as Reliance Capital, Max India, and Bajaj Finserve were in the limelight.
Shares of metal companies, including Tata Steel, Hindalco and Sesa Sterlite, evoked fresh buying after a Chinese manufacturing gauge topped estimates, said traders.
Sectorally, the BSE Metal index rose 1.47 per cent, the best among peers. It was followed by the IT sector index rose by 0.90 per cent and FMCG index by 0.86 per cent.