The BSE Sensex rose for a third day after the Bahujan Samaj Party (BSP) said it would support foreign direct investment in supermarkets in a vote on Friday in the Rajya Sabha.
Shares were down for most of the day before rebounding on news the BSP would support the government's move to allow FDI in retail, which may help tilt the vote in the government's favour.
The government won the vote in the Lok Sabha on Wednesday, but is in minority in the Rajya Sabha.
Gains were led by a rebound in rate-sensitive stocks such as ICICI Bank
"The market got a boost from BSP chief Mayawati's statement which coincided with a positive European share opening," said Dhananjay Sinha, co-head of institutional research at Emkay Global Financial Services.
Vote on FDI in retail remains the key that will decide the market's direction in near term, added Sinha.
0.49 percent, or 94.94 points, to end at 19,486.80, to mark its highest close since April 26, 2011.
Earlier in the session, shares fell on profit-taking after the index had gained over 5 percent in the previous nine sessions since the start of the winter session of parliament in late November.
The broader Nifty rose 0.52 percent, or 30.40 points, to end at 5,930.90.
Among the gainers, ICICI Bank ended up 1.42 percent, while Tata Motors
Shares in Pantaloon Retail
Shares in fertiliser makers such as Rashtriya Chemicals
Among stocks that fell, GMR Infrastructure
Technology shares fell for a second day, with Cognizant's SEC filing clouding revenue outlook for the sector.
Cognizant Technology Solutions Corp