The Nifty rose over 1 percent to a record high on Tuesday as metals stocks advanced after China's economic growth data came in slightly better than expected, while blue chips were underpinned by widespread confidence about the domestic economy.
The 50-share broader index rose as much as 1.16 percent to 8,649.40, surpassing its previous record of 8,626.95 hit on Dec. 4, 2014. The benchmark BSE Sensex gained 1.23 percent, but nearly 200 points away from its all-time high.
The Reserve Bank of India's surprise rate cut on Thursday has sparked a rally in markets, and investors are hopeful Prime Minister Narendra Modi's government will follow up with wide-ranging reforms when it unveils its fiscal budget next month.
That has investors primed for India to outperform most other emerging markets this year, repeating a similar performance to the 29.9 percent gain by the BSE Sensex last year, despite lingering uncertainty about the global economy, including in the deflation-hit euro zone.
"India's growth outlook remains insulated and relatively better than its rivals," said U.R. Bhat, managing director at Dalton Capital, a unit of British-based investment management firm Dalton Strategic Partnership LLP.
The BSE Sensex has gained 6.1 percent in dollar terms in 2015, making it Asia's best performing equity index after Pakistan's Karachi SE 100 index according to Thomson Reuters data. It was the second-best performing index in Asia last year.
Metals shares led gains after China posted economic growth that was slightly better than expected, even though it was its slowest in 24 years.
Tata Steel gained 2.9 percent, while Sesa Sterlite rose 3.3 percent.
Stocks tied to the domestic economy -- from rate-sensitives to industrials and infrastructure -- are expected to drive the rally ahead, analysts said.