The Sensex climbed more than 1 per cent to their highest in 33 months on Friday, putting them on track to post gains for the fifth consecutive week on the back of surging foreign fund investments.
Leading car maker Maruti Suzuki rallied 2.9 per cent as its September sales rose 29.6 per cent to a record.
Mahindra & Mahindra, the top utility vehicle maker, and truck leader Tata Motors rose 2.1 and 2 per cent respectively in anticipation of robust sales figures.
India's manufacturing sector continued to expand in September although at a considerably slower pace than in preceding months, predominantly weighed down by a fall in new orders and output, a survey showed.
At 11:42 am, the 30-share Bombay Stock Exchange (BSE) index was up 1.18 per cent at 20,306.22 points, with 28 of its components advancing. It had hit 20,349.74, its highest since January 2008.
The benchmark, which is up 1.3 per cent so far this week, has gained 16.3 per cent in the year to date, boosted by foreign fund inflows of $18.2 billion.
R K Gupta, managing director of Taurus Mutual Fund, said there was a sense of relief
after a court ruling on a potentially troublesome dispute passed without any incident.
"People are drawing comfort after the Ayodhya verdict, as it did not create any panic and peace has prevailed," he said.
An Indian court ruled on Thursday that the site of a demolished mosque would be split between Hindus and Muslims, dousing immediate fears of a violent backlash in one of the country's most religiously divisive cases.
Reliance Industries, which has been a laggard due to lack of any near-term positives, climbed 1.2 per cent in an attempt to catch up with the broader market rally.
The stock, which has the highest weight on the Sensex, is down more than 8 per cent this year.
Financials continued to gain on hopes for better loan demand on the back of robust economic growth.
State Bank of India and ICICI Bank firmed 0.4 per cent and 1.4 per cent respectively.
In the broader market, gainers were nearly thrice the number of losers on volume of 209 million shares.
The 50-share NSE index was up 1.2 per cent at 6,099.60.
Elsewhere, the MSCI's measure of Asian markets other than Japan was up 0.2 per cent, while Japan's Nikkei rose 0.6 per cent.
Stocks on the move
* Rural Electrification Corp rose 6.8 per cent to 365.80 rupees, after the Reserve Bank of India approved increase in foreign institutional investors limit in the company to 35 per cent from the current 24 per cent.
* IL&FS Transportation Networks firmed 1.2 per cent to 322.10 rupees, after it said it was the lowest bidder for a 10.94-billion-rupee road project, to be developed with Spanco in consortium.
Main top 3 by volume
* Tirupati Inks on 31.7 million shares
* Mahindra Satyam on 6.6 million shares
* Unitech on 4.7 million shares