Besides, covering-up of short positions by speculators ahead of monthly expiry in the derivatives segment, supported the rally.
The 30-share barometer regained the psychological 27,000-mark for the first time since September 23 by surging 150.26 points, or 0.56 percent, to 27,031.08 with all the sectoral indices, led by auto, realty and oil & gas, trading in positive zone with gains up to 0.97 percent.
The gauge had gained 127.92 points in the previous session on rising rate cut hopes and good earnings.
Also, the National Stock Exchange index Nifty gained 38.80 points, or 0.48 percent, to 8,066.40.
Brokers said besides sustained buying by investors on hopes of further reforms and encouraging earnings by some more bluechip companies, covering-up of short positions by speculators in view of tomorrow's monthly expiry in the derivatives segment, influenced the trading sentiment.
In addition, a firming trend at other Asian markets following overnight gains in the US, accelerated buying activity on the domestic bourses here, they said.
Among other Asian markets, Japan's Nikkei rose 1.38 percent, while Hong Kong's Hang Seng was trading 0.87 percent higher in early trade.
US Dow Jones Industrial Average ended 1.12 percent down in Tuesday's trade.