The Sensex was trading 26,925 points, up 53 points over Monday's close, while the Nifty rallied to 8045 points.
Stocks like Hero Motor Corp, ICICI Bank, Bharti Airtel and Coal India gained ground. Cipla surged a huge 7 per cent after reports that the company has launched an anti-asthma inhaler in Germany and Sweden that is a generic version of GlaxoSmithKline Plc's Advair.
Shares in Jindal Steel and Hindalco were trading week after the likely cancellations of coal blocks allocated.
Other Nifty losers in trade were Hindustan Unilever, Sesa Sterlite and Tata Steel.
PSU banking stocks saw some selling pressure in trade with notable losers being Andhra Bank, Bank of Baroda and Union Bank of India.
Mid cap stocks continued their rally for a second day running with Jain Irrigation and India Cements among the prime movers.
Meanwhile, markets in Asia were trading weak, with the Shanghai Composite and the Hang Sang marginally lower.