The NSE Nifty 50 index rose 0.7% to 14,895.65, while the benchmark S&P BSE Sensex was up 0.7% at 50,614.29. Both the indexes touched record intra-day highs earlier in the session after rising as much as 0.84% and 0.86% respectively.
Investors are also waiting for the central bank's monetary policy decision on Friday when rates are expected to be held at record lows.
The indexes were trading lower in the morning as bank stocks were in the red.
"The early market opening saw some hesitation from buyers as the market bounced from 13,680 level to 14,700 in two days," said Rahul Sharma, market strategist and head of research at Equity99 markets.
The Nifty Bank index, which slipped as much as 1.5%, closed 1.7% higher and drew support from a 6.6% surge in shares of State Bank of India. The country's largest lender beat quarterly profit estimates as its retail lending growth recovered to pre-pandemic levels.
"But since the indexes did not go down something like 1-2%, which usually has been happening in the last two months, the buyers rushed back, driven by a favorable budget and global indexes" Sharma added.
Shares of motorcycle maker Hero MotoCorp rose 1.8% ahead of its results, while the benchmark auto index gained 1.1%.
Cigarette maker ITC Ltd advanced 6.1% as the top percentage gainer on the Nifty.
(Reporting by Philip George in Bengaluru; Editing by Maju Samuel)
By Philip George