The new-found optimism spurred stocks to new levels as the Nifty ended at a new peak of 9,160 today and the Sensex notched up minor gains, with liquidity giving investors enough confidence.
Fund inflows continued unabated after the BJP's sterling win in UP and Uttarakhand assembly elections.
Buying activity picked up after the GST Council yesterday paved the way for rollout of the new tax regime from July, triggering interest in FMCG stocks.
The NSE Nifty crossed the key 9,200-mark for the first time in early hours to hit an all-time high of 9,218.40. But it settled at 9,160.05 -- a new high -- up 6.35 points, or 0.07 per cent, surpassing yesterday's close of 9,153.70.
The Sensex closed up 63.14 points, or 0.21 per cent, at 29,648.99.
On a weekly basis, the BSE Sensex rallied 702.76 points, or 2.42 per cent, and the Nifty 225.50 points, or 2.52 per cent, extending gains for the second straight week.
However, global markets showed some weakness as Asian bourses struggled and caution prevailed following the previous day's rally. Investors were concerned about a lack of detail on Donald Trump's tax reforms and spending promises in his first budget.
The BSE gauge had gained 187.74 points in previous session, tracking firm global markets after the prospects of a gradual approach to US rate hike removed a big uncertainty.
Shares of cigarette makers were in the limelight after the GST Council approved a proposal to cap cess on demerit goods such as tobacco and cigarettes at 290 per cent or Rs 4,170 per 1,000 cigarette sticks.
Among cigarette stocks, VST Industries led gains by surging 7.55 per cent to Rs 2,839.45 while Godfrey Phillips rose 0.77 per cent to Rs 1,294.95.
In the 30-share Sensex kitty, ITC Ltd, cigarette giant, emerged as the top gainer by climbing 4.85 per cent to Rs 281.20, followed by Infosys by 1.12 per cent to Rs 1,040.
Other gainers were Wipro, Maruti Suzuki, Axis Bank, HDFC Bank, TCS, RIL and HDFC Ltd on sustained buying activity.
Meanwhile, foreign funds bought a massive net Rs 1,360.10 crore yesterday, according to provisional data.
"Markets continued to move upwards for yet another session on the back of robust foreign fund inflows, powered by BJP's huge win in UP and Uttarakhand," said Deepak Pahwa, a Delhi-based stock broker.
Sectorally, BSE FMCG index gained a whopping 2.41 per cent, followed by realty 0.78 per cent, IT 0.71 per cent and teck 0.10 per cent.
However, broader markets depicted a mixed trend with small-cap index rising 0.04 per cent while mid-cap index shed 0.14 per cent.
In overseas markets, key indices in Asia such as Hong Kong's Hang Seng rose 0.09 per cent, while Japan's Nikkei shed 0.35 per cent. Shanghai Composite Index fell 0.96 per cent.
Among European markets, London's FTSE was up 0.03 per cent and Paris CAC 40 gained 0.29 per cent in their early deals, but Frankfurt's DAX shed 0.11 per cent.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)