The BSE benchmark index, which had gained a mere 2 points in yesterday's trade, moved up further by 79.71 points, or 0.47 per cent, to close at 17,185.01.
The 30-share Sensex traded between 17,205.26 and 17,038.59 on alternate bouts of buying. 21 scrips including Bajaj Auto, Tata Power and Jindal Steel ended higher while Tata Motors, Dr Reddy's and NTPC led the nine Sensex losers. Private banks including ICICI bank and HDFC Bank also rose.
On similar lines, the 50-share National Stock Exchange index Nifty rose by 23.45 points or 0.45 per cent to 5,216.30.
Besides a higher opening on the European markets after the much-awaited testimony from US Federal Reserve Chairman Ben Bernanke, hopes that the Indian government will accelerate economic reforms after the Presidential elections also buoyed the trading sentiment, brokers said.
However, deficient rains in the country so far have forced market participants to adopt a cautious approach, they added.
After easing of wholesale inflation, data today showed retail inflation barely declined to 10.02 per cent in June.
"...Movements clearly indicate indecision in the market due to upcoming events like the Presidential poll tomorrow, RBI policy on July 31 as well as corporate earnings," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.
Dealers said buying was seen in small-cap and mid-cap stocks on signs of improvement in confidence. The BSE Smallcap and Midcap indices rose 0.29 and 0.53 per cent respectively.
Meanwhile, rupee weakened after opening stronger in early trade. The currency was was trading at 55.4 levels to a dollar after resuming at 55 levels today.