A positive interim budget, stable inflation, foreign flows and satisfactory December-quarter results have increased confidence in Indian equities ahead of general elections, the next key trigger, due by May.
Also boosting sentiment, overseas investors bought Indian shares worth $46.92 million on Tuesday, extending their buying streak in Indian shares to a fifth day, totalling $221.79 million, after being sellers in each of previous sessions this month till February 10, sebi and excahnges showed .
The benchmark BSE index rose 0.43 per cent, or 88.76 points, to end at 20,722.97.
The broader NSE index rose 0.42 per cent, or 25.65 points, to end at 6,152.75, closing above the technically important 6,150 level.
Both indexes marked their highest close since January 24 although volumes were dismal in comparison to Tuesday as India's currency, debt and money markets were closed on Wednesday for a public holiday.
Software stocks rose on continued optimism about US business outlook, which looked up
Infosys gained 1.9 per cent, while Tata Consultancy Services and Wipro rose 1.5 per cent each.
Among pharmaceutical exporters, Lupin rose 2.1 per cent while Dr. Reddy's Laboratories ended up 1.1 per cent.
Sun Pharmaceutical Industries gained 2.2 per cent after the company got U.S. Food and Drug Administration approval to sell a drug to treat osteoporosis, a bone-weakening disease.
Ranbaxy Laboratories gained 3.2 per cent after the New York Attorney General and the US units of the Indian company and Teva Pharmaceutical Industries settled claims that an agreement between the two drugmakers unlawfully restricted competition.
Banks rose 0.33 per cent, rising for a fourth day on continued optimism around a better-than-expected fiscal deficit target and gross market borrowing for 2014/15 in the interim budget.HDFC Bank rose 1.5 per cent while State Bank of India ended 0.5 per cent higher.
Hero MotoCorp ended 1.8 per cent lower on profit-taking after rising 2.2 per cent over the last two sessions after the country's finance minister proposed cutting the factory gate duty on vehicles, a move that could boost sales.