Markets ended the day higher led by solid gains in PSU Banking stocks on reports of capital infusion plans by the government.
The Sensex ended the day higher by 74 points, while the Nifty ended higher by 28 points largely fuelled by a temporary relief to the debt crisis in Greece.
Apart from PSU banking stocks other gainers included Coal India, Cipla, Tata Steel and heavyweight ITC.
Software stocks exhibited a very weakish trend with Infosys, TCS and Wipro among the losers in trade.
Shares in diversified conglomerate L&T rallied after reports that the company is set to list infotech arm to raise Rs 1600-1800 crore.
Energy stocks were in the limelight with HPCL hitting a new record high in trade of Rs 745. The biggest winners in trade were the PSU banking names after there were hints of huge capital infusion into these banks. Punjab National Bank and Bank of Baroda were the biggest winners in trade.
Shares in Arvind were up 5 per cent after a broking firm said that margins and turnover would double in the next five years after the broking house met the top management.
Meanwhile, the sharp rally in the European markets continued for a second straight day with the German DAX, French CAC and the UK's FTSE all rallying in trade on hopes of a Greece deal being struck later this week.
Asian indices, except the Chinese Shanghai Composite all ended higher on hopes of a Greece deal.