The 30-share index surged another 205 points to end at 20,996.53, a level not seen in nearly five weeks.
Persistent foreign capital inflows into equities, better-than-expected growth in second quarter in India's GDP and rise in rupee value also boosted the market sentiment.
Shares of banking, capital goods, power, metal and PSU sectors firmed up sharply on good buying enquiries. Small and midcap scrips also rose on firm demand from retail investors.
"GDP numbers, which were better than estimates, and improvement in manufacturing data for November also boosted the markets," said Nidhi Saraswat, Senior Research Analyst at Bonanza Portfolio Ltd.
India's economy grew 4.8 per cent in the three months ended September 30 as agriculture and factory output improved. GDP number was released after market hours on Friday last.
Most exit polls indicated gains for the BJP in Delhi, Chhattisgarh, Madhya Pradesh and Rajasthan, where Assembly polls were held in November-December. The rupee hardened to 61.40 against the dollar during the week.
The Sensex resumed lower at 20,771.27, but recovered immediately to cross 21,000 after one-month and touch 21,165.60 before ending the week at 20,996.53, showing a gain of 204.60 points, or 0.98 per cent, over the last close.
The BSE barometer has gained 779.14 points, or 3.85 per cent, during the two weeks.
The NSE 50-share Nifty firmed up by 83.80 points, or 1.36 per cent, to end at 6,259.90. The broader NSE benchmark has soared by 264.45 points, or 4.41 per cent, over the last two weeks.
Shares of power generation and distribution companies rose on positive response from investors to the follow-on public offer of state-run Power Grid Corporation of India.
Of the 30 Sensex shares, 18 posted gains while the rest logged losses.
Major gainers were Tata Power Ltd (10.82 pct), Jindal Steel & Power Ltd (9.95 pct), Bharat Heavy Electricals Ltd (BHEL) (9.80 pct), ICICI Bank (7.01 pct), Coal India (6.63 pct), Tata Steel (5.43 pct), Larsen & Toubro (5.10 pct), Wipro (4.76 pct), HDFC Bank (3.19 pct), GAIL (2.43 pct), Hero MotoCorp (2.35 pct), SBI (2.21 pct), Sun Pharmaceuticals Industries (1.74 pct), Reliance Industries (RIL) (1.66 pct), Bharti Airtel (1.51 pct), Maruti Suzuki India (1.23 pct) and NTPC (1.12 pct).
Among the key losers, Hindustan Unilever (HUL) dropped by 5.65 pct, ITC 2.66 pct, Dr Reddys Laboratories 2.53 pct, Tata Motors 1.91 pct, Hindalco Industries Ltd 1.71 pct, Oil & Natural Gas Corp (ONGC) 1.31 pct, Housing Development Finance Corporation Ltd (HDFC) 1.29 pct and Bajaj Auto dropped 1.04 pct.
Among the other S&P BSE indices, Bankex rose by 4.98 pct, Capital Goods 4.71 pct, Power 4.56 pct, Metal 3.27 pct and PSU gained 2.63 pct.
Small and mid-cap indices firmed up by 2.07 pct and 1.00 pct, respectively.
Dollex-100, Dollex-200 and Dolex 30 also hardened by 2.82 pct, 2.77 pct and 2.50 pct, respectively.
However, S&P BSE-FMCG dropped by 2.74 per cent. The total turnover at BSE and NSE fell to Rs 9,960.86 crore and Rs 54,025.63 crore, respectively, from Rs 11,911.78 crore and Rs 58,148.00 crore last week.