Earnings will continue to set the tone in Indian markets, with Larsen & Toubro Ltd , Maruti Suzuki India Ltd and Hindustan Unilever Ltd among blue chip companies set to post October-December results.
The solid results have come after Indian markets posted decent gains this month, buoyed by expectations of interest rate cuts from the RBI. The government's fiscal consolidation measures, including raising diesel prices last week, have also supported shares, sparking continued foreign investor buying.
"Signs are encouraging so far for earnings season, but a lot of infrastructure and PSU stock are yet to announce," said Sonam Udasi, head of research at IDBI Capital.
"RBI policy can kick start sentiment in a way but more importantly it will be how policy makers will be able to manage in budget and deficit targets," Udasi added.
The Sensex rose 0.31 percent, or 62.78 points, to end at 20,101.82, its highest close since January 6, 2011.
The Nifty rose 0.3 percent, or 17.90 points, to end at 6,082.30, its highest close since January 4, 2011.
January futures contract on India's 50-stock index breached 6,100 points earlier in the day, marking the first time a near-month index futures contract rose over that level since January 6, 2011. The contract ended at 6,097.90 points.
Reliance Industries Ltd , the most valuable stock in India, rose 2.2 percent to 919.95 rupees.
Among other companies that reported earnings recently, ITC gained 1.43 percent after it beat estimates on Friday with a 21 percent rise in quarterly profit as cigarette volumes improved after four quarters of stagnant growth.
Shares in Reliance Communications Ltd gained 6.84 percent, its biggest gain since November 26, 2012, after CLSA said several catalysts could help the company unlock value, including an "inevitable" tower/infrastructure-sharing deal with Reliance Industries for its 4G rollout.
Budget carrier SpiceJet rose 5 percent after swinging to a quarterly profit on Monday, aided by higher fares.
The improved earnings also boosted rival Jet Airways , which gained 5.34 percent.
"SpiceJet's result offers a very positive read-through for Jet's 3Q results," IIFL said in a note.
Shares in Hindustan Unilever rose 1.4 percent, ahead of October-December results due on Tuesday, after earlier dipping below its 200-day moving average for the first time since May 5, 2011.
Among shares that fell were Housing Development Finance Corp (HDFC) , which dropped 1.2 percent after missing estimates on Monday.
Shares in Mahindra & Mahindra fell 0.44 percent after the Business Standard newspaper reported that the government might impose a higher excise duty, or a surcharge, on diesel sports utility vehicles, citing an unnamed finance ministry official.
(Additional reprting by Abhishek Vishnoi; Editing by Jijo Jacob)