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Benchmark indices continue to maintain the strong momentum led by financials, capital goods and auto shares.
Meanwhile, inflation accelerated to an eight-month high of 7.0% in October, mainly driven by higher fuel and manufactured goods prices, government data showed on Thursday.
Wholesale prices, the main inflation measure, had risen 6.46% in September.
Reserve Bank of India (RBI) governor, Raghuram Rajan, expressed comfort on Wednesday about core inflation and highlighted the narrowing current account deficit.
At 12:55 PM, the 30-share Sensex was up 294 points or 1.43% at 20,489 and the 50-share Nifty was up 88 points at 6,078.
On the global front, Asian stocks bounced from six-week lows on Thursday, spurred by Federal Reserve Vice Chair Janet Yellen's dovish comments which suggested the U.S. economy could count on stimulus support for a longer period than markets anticipate.
Yellen, in remarks released ahead of her closely-watched Senate confirmation hearing on Thursday to succeed Fed chief Ben Bernanke, said the Fed has "more work to do" to help the economy, indicating she was in no hurry to start tapering stimulus.
The comments sent U.S. stocks surging and supported bond prices, while the dollar came under pressure, although it narrowed its looses during the Asian session.
Back home, the rupee gained on Thursday as comments from nominee for Federal Reserve chair Janet Yellen and Reserve Bank of India governor Raghuram Rajan delivered a two-dose boost of optimism for a currency that had fallen to a two-month low.
On the sectoral front, BSE Bankex, Capital Goods and Auto indices have spurted by 3% each. Sectors like Realty, Power, Oil & Gas, Metals, Consumer Durables, PSU and FMCG have gained between 1-2%.
The main gainers on the Sensex at this hour include Tata Motors, ICICI Bank, L&T, Tata Steel, M&M, Bharti Airtel, Hero Moto and BHEL, all surging between 2-5%.
Tata Motors has surged over 5% to Rs 385, recovering more than half of its losses recorded after announcements of July-September (Q2) earnings.
On the losing side, Coal India is trading lower by 3% at Rs 277 on NSE in otherwise strong market after reported a lower than expected net profit at Rs 3,052 crore for the quarter ended September 30, 2013 (Q2), due to lower selling prices and higher wage and diesel costs. Analyst on an average had expected profit of Rs 3,399 crore.
The broader markets are performing in line with the benchmark indices- BSE Midcap and Smallcap indices have gained by over 1%.
The market breadth in BSE remains firm with 1,351 shares advancing and 824 shares declining.
