Infrastructure companies and select blue chips pulled Indian shares up from a 2.3% intraday fall following a weak forecast from Infosys Technologies to close at a six-month high Wednesday.
The Bombay Stock Exchange's benchmark Sensitive Index rose 2.9% to close at 11,284.73, after trading between 10,719.18 and 11,337.75.
The 30-stock index had closed higher than this on Oct. 14 - at 11,483.40. Wednesday's was the eighth straight session of gains - another first in one-and-a-half years.
Infosys Technologies reported a better-than-expected fourth-quarter profit, but its shares fell after the technology bellwether forecast, for the first time, a decline in revenue and profit in dollar terms for the current financial year.
The lower-than-expected forecast initially weakened sentiments, said Sunil Pachisia, vice president of Pratibhuti Viniyog. But the markets pared losses amid continued fund buying in fundamentally-good stocks.
Analysts expect the rally to sustain in the wake of high liquidity following a sustained upswing in global markets and on hopes fiscal fourth-quarter earnings won't decline as much as earlier expected.
"Funds, long been waiting in the wings, are jumping in," said Kishor Ostwal, managing director of CNI Research. "The Indian market rally is far from over and fund managers don't want to let go off this chance."
There is some $17 trillion of cash lying to be deployed in global equity markets, Mr. Ostwal said.
Total market-wide turnover was more than 1 trillion rupees, the highest since Sept. 25, 2008.
On the National Stock Exchange, the 50-stock S&P CNX Nifty rose 3% to 3,484.15.
Total traded volume on the Bombay Stock Exchange was 77.01 billion rupees ($1.55 billion), compared with Monday's 54.12 billion rupees. Gainers outnumbered decliners 2,173 to 463, while 67 stocks were unchanged.
The Sensex, which has risen more than 38% since March 9, is likely to trade between 10,600 and 11,500 this week, according to Dow Jones Technical Analysis.
Among blue chips, petrochemicals firm Reliance Industries - India's biggest company by market capitalization - rose 3.2% to 1,825.55 rupees, ICICI Bank surged 6.8% to 443.70 rupees, State Bank of India jumped 6.7% to 1,295.60 rupees, mortgage lender Housing development Finance Corp. rose 5.1% to 1,771.55 rupees and telecommunications company Bharti Airtel added 3.3% to 685.10 rupees.
Infrastructure stocks rose because of increased government focus on infrastructure spending, lower commodity costs and declining interest rates. Larsen & Toubro rose 6.7% to 878.80 rupees, Bharat Heavy Electricals gained 9.5% to 1,669.85 rupees and Reliance Infrastructure jumped 7% to 710.30 rupees.
Technology stocks dropped following the weak Infosys outlook. Infosys - the first major Indian software company to report results - fell 2.7% to 1,370.80 rupees, while bigger rival Tata Consultancy Services dropped 2.4% to 577.55 rupees.
