At the closing bell, the NSE Nifty 50 index was up 1.02% at 17,805.25, while the benchmark S&P BSE Sensex ended 1.14% higher at 59,855.93. Both indexes notched their third consecutive session of gains.
Authorities in Delhi on Tuesday ordered people to stay home over coming weekends as COVID-19 cases quadrupled in a week, while India reported 37,379 new infections in the last 24 hours, the highest since early September.
Experts suspect the highly transmissible Omicron variant has begun to overtake the Delta variant, but analysts say investor sentiment remains intact as reports suggest it might not derail economic recovery.
Lifting the blue-chip indexes in Mumbai were shares of oil-to-telecoms heavyweight Reliance Industries that climbed 2.4%. Reliance's telecom arm is reportedly planning its largest ever rupee bond sale for up to 50 billion rupees ($670.83 million) worth of notes.
That also helped the Nifty energy index close 2.28% higher, its best day in over a month. State-owned Oil and Natural Gas Corp added 3.3% after it named a new top boss.
The Nifty Bank index extended its rally with gains of 1.15%. Government-owned State Bank of India rose 2.7%, while private lenders Axis Bank and Kotak Mahindra Bank were up 1.8% and 1.5%, respectively.
Yes Bank closed 3.2% higher after reporting a growth in net advances and deposits for the December quarter.
On the downside, Vedanta's shares slumped as much as 6.7% after the mining conglomerate reported third-quarter production numbers. Vedanta was the top loser on the Nifty metal index, which lost 0.38%.
(Reporting by Shivani Singh in Bengaluru; editing by Uttaresh.V and Ramakrishnan M.)