India's benchmark index rose nearly 1 percent on Tuesday to mark its highest close in 2-1/2 years as consumer goods shares rallied to record highs with investors shifting to defensive stocks in an uncertain economic environment.
The central bank's move to further curb gold imports was also seen as a positive, given that the prospective measures would help narrow the current account deficit.
Gains also tracked higher global shares that rose towards five-year highs on Tuesday helped by China's plans for avoiding a hard landing in its slowing economy, while gold took a breather after its biggest one-day gain in more than a year.
However, analysts remain cautious after mixed earnings so far and on concerns about potentially stronger measures from the central bank to defend the rupee after its recent move to shore up short-term interest rates.
"Only few stocks are participating in the rally and with RBI tightening liquidity there is reluctance at these levels," said Deven Choksey, managing director at K R Choksey Securities.
The benchmark BSE index rose 0.71 percent, or 143.01 points, to end at 20,302.13, rising for a fifth consecutive session to mark its highest close since January 2011.
The broader NSE index rose 0.76 percent, or 46 points, to end at 6,077.80.
Consumer goods companies continue to make record highs as funds opt for traditionally defensive stocks in an uncertain environment underscored by the rupee's volatility.
Blue chip bank stocks gained on value buying after recent sharp falls, with a 6.4 percent fall in NSE's banking sub-index last week.
Yes Bank Ltd rose 3.5 percent a day before its quarterly results.
India's central bank moved to tighten gold imports while offering relief to domestic sellers by lifting restrictions on credit deals, which was seen a net positive for jewellery makers such as Titan Industries Ltd, which ended 5.9 percent higher.
Tech Mahindra Ltd shares rose 0.6 percent, taking gains so far in the month to 11.3 percent, on cheap valuations relative to its peers even after the company became India's No. 5 IT services provider on its merger with Satyam Computer Services, analysts said.
The company completed the merger of its unit Satyam Computer Services with itself on June 25.
However, among stocks that fell, Ambuja Cements Ltd fell 0.5 percent, adding to 4.7 percent fall on Monday, a day ahead of its earnings results.
Ambuja Cements may miss profit consensus forecast for the April-June quarter, Thomson Reuters StarMine data showed.