The Nifty rose as much as 2.8 percent for the week, snapping a four-week losing streak and crossing the psychologically important 8,000 point level during the day. The markets will be closed on Thursday and Friday for holidays.
Sentiment was upbeat this week after the government introduced several reforms, among them lifting price controls on diesel and setting the stage for liberalization of the coal industry. Hopes for further steps gained currency after Prime Minister Narendra Modi’s party won two state elections.
“The sentiment is upbeat now. The reforms initiatives from the government is a positive sign. A record high is achievable in the next week,” said Suresh Parmar, head, institutional equities at KJMC Capital Markets.
“Corporate earnings will be the key in the coming week to set the immediate trend.”
Shares also tracked higher Asian markets after strong gains on Wall Street and hopes of fresh stimulus from the European Central Bank.
The Sensex closed 0.8 percent higher at 26,787.23 points, rising 2.6 percent for the week.
The Nifty rose 0.86 percent to close at 7,995.90.
Auto stocks led the gainers. Bike maker Hero MotoCorp hit a record high on expectations of strong sales in the festive season before finishing up 4 percent.
Tata Motors closed up 3.5 percent, Bajaj Auto gained 3.4 percent, Maruti Suzuki India Ltd ended 3.3 percent higher and Mahindra and Mahindra closed up 2.6 percent.
Other blue-chips also gained on strong global cues. Reliance Industries rose 1.8 percent, while Larsen and Toubro closed up 2.8 percent.
Mining stocks advanced for the second day after the government promised to open up the coal industry to private players on Monday.
Jindal Steel and Power surged 10.1 percent, adding to its 7.3 percent gain on Tuesday, while Sesa Sterlite added 0.5 percent.
Shares in Dewan Housing Finance Corp gained 8.5 percent, while Tata Metaliks closed up 17 percent after both their earnings beat market expectations.
Among stocks which fell, Biocon Ltd closed down 0.8 percent after its earnings missed estimates.