Besides, encouraging June quarter earnings by several bluechip companies and positive global cues on easing geo-political tensions over Ukraine, also bolstered the domestic sentiments, said brokers.
After moving in a narrow range in early trade, the 30-share Sensex climbed to new intra-day high of 26,413.11 as buying momentum picked up. Thus, it bettered its previous all-time peak of 26,300.17 hit on July 25, 2014.
Boosted by a flurry of buying in PSU, oil and gas, capital goods, banking, infrastructure, consumer durables, auto and metal scrips, the Sensex settled at 26,390.96 -- a new record at close -- gaining 287.73 points or 1.10 per cent. Its previous record at close was 26,271.85 reached on July 24. In five sessions, the gauge has rallied over 1060 points.
"Today the Nifty performed much better than world markets and beat the expectations of optimistic bulls. Fall in crude prices and likely chances of rise in domestic currency has developed the momentum and that has triggered massive short covering towards the end. By crossing 7800, the Nifty has set up the target of 8000 plus in the near term. However, buying is advisable on dips around 7800. Today almost all banks, capital goods and infra stock did extremely well. Auto stocks also did well, especially Tata Motors and Maruti. We are of the view that technology stocks are going to underperform in the near term but buying in mid cap IT stocks should do well," said Shrikant Chouhan, Head of Technical Research, Kotak Securities.
ICICI Bank, ONGC, Tata Motors, Axis Bank, Cipla and BHEL were among prominent gainers in 24 Sensex counters that rose.
The 50-scrip NSE Nifty also reclaimed the 7,800-mark for the first time since July 25, by climbing 82.55 points, or 1.06 per cent to close at new high of 7,874.25. It surpassed its previous high at close of 7,830.60 on July 24.
The broader index also hit an intra-session record high of 7,880.50, surpassing previous peak of 7,840.95 (July 24).
"Markets witnessed a strong rally, which was boosted by positive statements from Prime Minister Narendra Modi, who emphasized the need for better governance and focus on improving infrastructure and manufacturing sector," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.
Positive global markets and easing crude oil prices also further strengthened the overall buying with small caps and midcaps participating well, she added.
Sectorally, the BSE PSU index gained the most by surging 2.83 per cent, followed by the oil and gas sector index rising 2.64 per cent, Banking index up 2.36 per cent, Capital goods index 2.33 per cent and Auto sector index 1.59 per cent.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 625.18 crore in the previous session, as per provisional data from the stock exchanges.
Indian shares hit record high on Modi hopes, wholesale inflation
(Reuters) Indian shares rose over 1 percent on Monday to a record high as blue-chips such as ICICI Bank surged after Prime Minister Narendra Modi vowed to fire up the bureaucracy to deliver results, while easing wholesale inflation also helped.
The broader NSE index rose as much as 1.14 percent to 7,880.50, while the benchmark BSE index gained as much as 1.19 pct to 26,413.11, surpassing their previous all-time highs hit on July 25.
Delivering his first Independence Day speech on Friday, Modi emphasised the need for better governance but announced none of the sweeping market reforms that many who handed him India's biggest election mandate in three decades have been awaiting.
India's wholesale price inflation eased to a five-month low in July, just days after retail inflation accelerated to a two month-high of 7.96 percent.
Sentiment also got a boost from a strong rebound in European stocks on reduced tension over Ukraine and overseas investors buying shares worth 6.25 billion rupees ($102.86 million) on Thursday, provisional exchange data showed.
"While Modi's speech has added to the confidence, indexes marking new highs amid heavy foreign flows suggests momentum. If flows remain positive then one can expect even higher levels in the near term," said U.R. Bhat, managing director Dalton Capital Advisors, which advises foreign investors in India.
The BSE index rose 1.1 percent, or 287.73 points, to end at 26,390.96, while the NSE index advanced 1.06 percent, or 82.25 points, to end at 7,874.25.
Both the indexes marked their fifth consecutive day of gains, their longest winning streak since July 24 when they gained for eight sessions.
Blue-chip stocks lead gains, with ICICI Bank rising 3.5 percent and Larsen and Toubro advancing 2.2 percent.
Oil and Natural Gas Corp gained 5.2 percent, while Tata Motors rose 4 percent.
Axis Bank rose 4.5 percent while State Bank of India ended higher 2.5 percent.
Tata Motors' Differential Voting Rights shares (DVR) jumped 5.6 percent after a report in the Times of India newspaper that Indian exchanges may consider admitting such shares on their benchmark indexes, traders said.
Drug maker Cipla Ltd gained 5 percent after April-June operating margins beat some analysts' estimates.
Low-cost carrier SpiceJet Ltd jumped 12.6 percent after June quarter operating profit at 90 million rupees ($1.5 million) before restructuring and certain one-off costs, beat some analysts estimates.
Jubilant Foodworks gained 6.2 percent after Bank of America Merrill Lynch started coverage with a "buy" rating and a target price of 1,375 rupees, saying the company is in a "sweet spot" in the large and high-growth quick service restaurants market.
Oil marketing companies gained after Brent fells below $103 a barrel on easing geopolitical risks.
Hindustan Petroleum Corp gained 6.4 percent, Bharat Petroleum Corp rose 5.7 percent while Indian Oil Corp advanced 4.2 percent.
However, software stocks fell on fears of appreciation in the rupee in the near term, traders said. Infosys fell 1.5 percent, Tata Consultancy Services lost 0.5 percent while HCL Technologies ended down 1 percent.
FACTORS TO WATCH
* Carney buoys sterling, dollar under pressure
* Brent falls below $103/barrel on easing risks
* European stocks rise as Ukraine fears ease
* Foreign institutional investor flows