In a choppy trading session, the 30-share BSE Sensex hit life-time high of 41,994.26 in day trade. It finally settled up by 92.94 points or 0.22 per cent at 41,952.63 - its all-time closing high.
The broader Nifty of NSE also scaled a lifetime high (intra-day) of 12,374.25, before ending 32.75 points, or 0.27 per cent, higher at 12,362.30, which is its record closing level.
"Market is moving ahead ignoring the sudden jump in CPI with an optimistic view on the budget and earnings growth visible in the on-going Q3 results," Vinod Nair, Head of Research, Geojit Financial Services Ltd commented.
Official data released after market hours on Monday showed that retail inflation soared to more than five-year high of 7.35 per cent -- above the RBI's comfort level -- in December due to high vegetable prices.
Wholesale price index-based inflation also surged to an eight-month high of 2.59 per cent in December due to high prices of food articles, according to official data released on Tuesday.
"The month-on-month bounce in inflation is expected to settle since a large part of the gains are one-time in nature, as indicated in the WPI which is still sober in-line with the slow activities of the economy," Nair said.
Hero MotoCorp was the top gainer in the Sensex pack, rallying 2.15 per cent. ITC rose by 1.74 per cent, NTPC by 1.48 per cent, M&M by 1.43 per cent, Tech Mahindra by 1.42 per cent, Axis Bank by 1.38 per cent, Nestle by 1.32 per cent, HDFC by 1.1 per cent and TCS 0.74 per cent.
On the other hand, IndusInd Bank was the biggest loser among Sensex stocks, dropping by 3.85 per cent. The bank posted a 32 per cent rise in net profit to Rs 1,300.20 crore for the December quarter. Gross non-performing assets (NPAs) rose to 2.18 per cent of total advances end-December.
RIL, Kotak Bank, SBI, L&T, ONGC and ICICI Bank fell up to 3.85 per cent.
Broader BSE midcap and smallcap indices rallied up to 0.75 per cent.
Among sectoral indices, BSE FMCG, metal, IT, auto, teck, utilities, power and healthcare indices rose up to 1.46 per cent, while energy, bankex, realty and capital goods indices fell up to 0.48 per cent.
Hemang Kapasi, Portfolio Manager - Equity Investment Products, Sanctum Wealth Management said, "While Nifty is making new highs, the relative performance of Indian equity market is rather weak. Indian market has underperformed its emerging market peers over last few months owing to concerns of economic slowdown."
Other Asian markets ended ona mixed note while stock exchanges in Europe were off to a tepid start.
Brent crude oil futures rose 0.16 per cent to USD 64.30 per barrel.
The rupee closed almost flat at 70.87 per US dollar. ANS MR MR