The BSE barometer, however, settled a tad lower but still a new closing peak of 27,915.88, a gain of 55.50 points of 0.20 percent.
The 30-share index resumed higher at 27,907.19 and rose further to a high of 28,010.39 before ending at 27,915.88.
Markets were enthused after Finance Minister Arun Jaitley today promised reforms in labour, land acquisition and insurance laws and expressed readiness to look at privatisation of some loss-making public sector companies.
The index surpassed its previous record high of 27,969.82 hit on November 3. Its previous closing peak was 27,865.83 (October 31).
Similarly, the CNX 50-share Nifty firmed up by 14.15 points, or 0.17 percent, to all-time closing high of 8,338.30.
"Markets consolidated post the recent rally in the markets, which has come about on the back of renewed optimism on fiscal reforms, sharp correction in crude prices, improved growth in US, liquidity easing by Japan and diminished possibilities of an immediate increase in US interest rates," Dipen Shah, Head- Private Client Group Research, Kotak Securities.
Strong foreign capital inflows coupled with strong European cues mainly boosted the domestic market sentiment, even as services sector activity in India stagnated during October amid weaker growth of new orders an per a HSBC survey.
Leading global crude oil producer Saudi Arabia yesterday slashed its export prices for the US market. "The fall in crude oil prices will have a positive impact on, among other things, will embolden the RBI to cut rates," said HDFC Securities in a note.
The market sentiment got a fillip after data showed Foreign Portfolio Investors on Monday bought shares worth a net Rs 1,413.34 crore.
Most Asian stocks ended mixed following weak economic data from China. Key benchmark indices in China, Taiwan, Hong Kong and South Korea fell by 0.19 percent to 0.63 percent while indices in Singapore and Japan rose by 0.18 percent to 0.44 percent.
Both exchanges, BSE and NSE will remain close tomorrow on account of Gurunanak Jayanti.     
Meanwhile, European stocks were trading higher as better-than-estimated earnings offset investor concern about the health of the region's economy. Key benchmark indices in UK, France and Germany were up by 0.57 percent to 0.95 percent.
In the BSE Sensex, 14 out of the 30 constituents ended higher while 16 scrips finished lower.
Major gainers from the Sensex pack included Axis Bank (2.93 percent), SBI (2.24 percent), Dr Reddy's Lab (2.24 percent), Sun Pharma (2.10 percent), ICICI Bank (1.84 percent), BHEL (1.72 percent), Infosys (1.02 percent), HUL (1.00 percent) and ITC (0.96 percent).
However, Hindalco fell by 4.10 percent, followed by Sesa Sterlite 3.79 percent, Coal India 3.16 percent, Bharti Airtel 2.70 percent, Tata Steel 2.29 percent, Hero Mocorp 1.77 percent, NTPC 1.76 percent, Tata Power 1.45 percent, HDFC 1.44 percent and Reliance Ind 0.98 percent.
Among the S&P BSE sectoral indices, Bankex rose by 1.41 percent, Healthcare 1.01 percent, IT 0.73 percent and Capital Goods 0.57 percent while Metal dropped by 3.03 percent, Power 0.91 percent, Oil&Gas 0.66 percent and Realty 0.38 percent.
The total market breadth remained positive as 1,634 stocks close in the green while 1,382 finished in the red. The total turnover rose to Rs 4,410.81 crore from Rs 3,506.62 crore on Monday.

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