The Sensex rose by 162.37 points, or 0.84%, to 19,417.46 as foreign investors remained net buyers for the 27 straight sessions.
According to brokers, investors buying to clear their pending short positions created in recent bear-run before the monthly settlement in the derivatives segment tomorrow also influenced the sentiment.
A firming Asian trend and government decision of additional incentives for exporters, hit hard by the global slowdown, that includes extension of two per cent interest subsidy for one more year till March 2014 were other supporting factors, they said.
Banking sector stocks were higher led by State Bank and ICICI Bank on expectations of an interest rate cut by the Reserve Bank of India in January.
The index heaviest Reliance Industries shot up by 0.98% to Rs828, while state-run State Bank of India spurted 1.84% to Rs 2,371.20. ICICI Bank rose by 2.38% to Rs1,147.95 and HDFC Bank by 0.64% to Rs679.50.