Banking stocks also stoked the rise amid expectations that the sector will report upbeat results for the current quarter.
The 30-issue benchmark Sensex rose 0.70 per cent to 3,352.77 points, its highest close since early-July.
Gainers outnumberd losers 796 to 560 in a volume of 73 million shares up from Mondays 60 million.
The broader National index Nifty rose 0.84 per cent to 1,085.00 points at close.
The markets are closed on Wednesday for Christmas.
"There has been some speculation about the stocks in which derivatives trading will now be allowed and today we saw some front-running happening," said Ramesh Damani, a Mumbai-based stock broker.
Last month, the Securities and Exchange Board of India (Sebi) said it was set to expand the number of stocks for derivatives trading by two-fold and authorised stock exchanges to decide on the shares.
Options and futures are now allowed only in 29 stocks, but their daily volumes total nearly Rs 2,800 crore ($583 million), or more than 50 per cent of the daily cash business on the National Stock Exchange and the Bombay Stock Exchange.
Traders said the exchanges were likely to unveil the new list in early January.
"We are working on the list," a Bombay Stock Exchange (BSE) official said. Officials at the rival National Stock Exchange (NSE) were immediately not available for comment. Media firm Zee Telefilms rose 1.34 per cent to Rs 98.40, software maker Polaris gained 2.4 per cent to Rs 181 and Hinduja TMT climbed 2.2 per cent to Rs 283.30 on that speculation.
A re-rating by fund managers of bank stocks after a new federal law armed lenders with more teeth to recover bad loans helped the sector.
State Bank of India (SBI), the nations largest commercial bank, climbed 1.3 per cent to Rs 282.85 and Bank of Baroda jumped 5.22 per cent to Rs 71.60.
"Sticky loans will start performing, it will make a huge differnce to these banks," said Damani.
Software among the most popular securities in the derivatives segment were in the limelight ahead of Thursdays expiry when the December contracts mature.
Prices in the cash market rose to catch up with the premiums in the futures segment.
"It was imminent because of the indication given by the premiums to the spot price," said Gauri Pande, dealer with IDBI Capital, a domestic brokerage.
Derivatives contracts usually begin trading at a discount as the month-end approaches, but in December the trend was reversed with many contracts quoting at a premium reflecting expectations of a further upside, analysts said.