At 2:20 pm, the S&P BSE Sensex was trading at 31,284, up 146 points, while the broader Nifty50 was ruling at 9,657, up 41 points.
In intraday trade, the 30-share Sensex gained as much as 195 points to touch a new high of 31,332, surpassing the previous milestone of 31,220 hit on May 29, while the broader Nifty50 rose as much as 16 points to reach a fresh high of 9,673, scaling last peak of 9,637 hit on May 29.
The broader market outperformed with the S&P BSE Midcap and the S&P BSE Smallcap indices adding 0.6% each.
The breadth, indicating the overall health of the market, was strong. On the BSE, 1,461 shares rose and 971 shares declined. A total of 137 shares were unchanged.
The Nifty Pharma index, the top sectoral gainer, advanced for the fourth consecutive session, led by gains Cadila Healthcare, Cipla, Divi's Lab, Aurobindo Pharma and Sun Pharma, which rallied in the range of 1-5% on the NSE.
Bharti Airtel climbed as much as 3.9% on receiving approval from the capital markets regulator Sebi and stock exchanges for its merger with Telenor India.
The Nifty Auto Index rose to a record level, rising as much as 0.93% to 10,992.70.
"Two-wheeler companies reported strong wholesale volumes on the back of wedding season and inventory built-up as companies ramp up production of BS IV vehicles," IIFL Wealth Management said in a report.
TVS Motor rose as much as 5.8% to an all-time high after posting a 16% rise in total sales for May on Thursday, while Hero MotoCorp also climbed 3.1% to hit a record high on strong two-wheeler sales in May.
Overseas, European markets opened at record highs. Euro STOXX 50 was up 0.9%, while Britain's FTSE 100 gained 0.4%.
Asian markets also rose to their best levels in more than two years as positive data on US manufacturing and employment and buoyant European factory growth boosted investor optimism.
MSCI's broadest index of Asia-Pacific shares outside Japan was last up 0.6%.
 "Sensex, Nifty gain 2.5% on the back of huge foreign inflow, hope of reforms getting speedier.")