The 30-share index resumed on a positive note at 26,815.41 and climbed to intra-day high of 26,983.48 as investors indulged in cornering recently beaten-down stocks.
However, it shed some gains on emergence of profit-booking towards the fag-end as participants turned cautious ahead of outcome of the US Federal meet later in the day and settled at 26,832.66, up 146.15 points or 0.55 per cent.
In four sessions, the index has gained 461.68 points.
Brokers said sentiments remained upbeat as monsoon rains have been above-normal till now and the country's trade deficit narrowed to a three-month low in May.
In addition, CBDT yesterday said the taxmen will not resort to coercive methods to recover dues towards Minimum Alternate Tax (MAT) on capital gains made by FIIs supported the rally, they said.
Despite ongoing winning-run, foreign investors have been net sellers on the bourses in the past few sessions. They sold shares worth Rs 521.65 crore yesterday.
Of the 30 Sensex stocks, 19 ended with gains.
Stocks of Reliance Industries maintained winning run for the fourth straight session and gathered another 3 per cent on continued optimism over the company's plans to start 4G phone services later this year.
Midcap index rose 1.44 per cent and smallcap index gained 1.33 per cent.
Globally, other Asian markets closed lower, while European stocks were down in their early trade.