Firming global markets also influenced the trading sentiments.
The BSE-30 index Sensex which had gained 26.34 points on Monday, gathered another 167.61 points at 15,428.22 in the first five minutes of trading.
Similarly, on the wide-based National Stock Exchange, Nifty was up 45.70 points at 4,485.90.
Stock brokers said banking sector stocks were active ahead of the announcement of Reserve Bank of India's credit policy.
They said overnight gains in ADRs of Indian companies on the US markets too generated buying interest.
Among banking stocks, SBI's shares climbed almost Rs 100 at Rs 1600 while ICICI Bank gained Rs 17.75 at Rs 932.
Other gainers were Reliance Industries, Bajaj Auto, Tata Motors, Grasim Industries, Larsen and Toubro, Ranbaxy Lab, Maruti Udyog and Tata Steel.