The BSE Sensex resumed lower at 21,918.83 on initial selling, but recovered immediately to a high of 22,018.52 before quoting at 21,994.10 at 1015 hrs, showing a gain of 59.27 points, or 0.27 per cent, from its last close.
The NSE Nifty also moved up by 16.95 points, or 0.26 per cent, to 6,554.20 at 1015 hours.
The market sentiment was boosted by data showing that foreign funds made heavy purchases of domestic stocks on Monday.
Foreign institutional investors (FIIs) bought shares worth a net Rs 1,253.65 crore yesterday, as per provisional data from the stock exchanges.
Major gainers were Tata Power (3.42 per cent), ICICI Bank (2.43 per cent), Bharat Heavy Electricals Ltd (BHEL) (1.46 per cent), Wipro (1.05 per cent), Larsen & Toubro Ltd (1.02 per cent) and Tata Consultancy Services (1.00 per cent).
Asian stocks rose yesterday as investors weighed data showing China's credit growth trailed estimates in February and awaited the conclusion of the Bank of Japan's policy meeting.
Key indices in China, South Korea, Hong Kong, Taiwan, Singapore and Japan were up between 0.14 per cent and 0.74 per cent.
US stocks slid on Monday, pulling the Standard & Poor's 500 Index down from a record, as a slowdown in Chinese exports fuelled concerns over global economic growth.
BSE Sensex gains 0.4 pct to record high as banks rally
(Reuters) India's NSE index rose 0.3 percent to a third consecutive record high as lenders such as ICICI Bank extended a powerful rally on the back of signs of an improving domestic economy and hopes that easing inflation will keep interest rates steady.
Foreign investors have been the main buyers of shares, with net purchases reaching 12.54 billion rupees ($206 million) on Monday, marking a 17th consecutive buying session for a net total of about $1.6 billion, according to exchange data.
The NSE index rose as much as 0.39 percent to a record high of 6,562.85 points, and was up 0.19 percent at 0405 GMT.
The benchmark BSE index was up 0.16 percent, not far from its record high of 22,023.98 points hit on Monday.
Lenders were the leading gainers, with the NSE bank sub-index up 0.93 percent. ICICI Bank Ltd, India's biggest private sector lender, rose 2.2 percent.