Mumbai: The BSE benchmark index Sensex extended gains for the third straight day by rising over 138 points in early trade on continued buying by funds and retail investors after RBI slashed short-term lending rate.

The 30-share BSE index, which had gained over 263 points in the past two sessions, rallied further by 138.41 points, or 0.80 percent, to 17,496.35, with all sectoral indices, led by realty and metals, trading in the positive zone with gains of up to 1.12 percent.

The wide-based National Stock Exchange index Nifty moved up by 39.80 points, or 0.75 percent, to 5,329.50.

Brokers said sentiment buoyed after RBI slashed short-term lending rate by 0.50 percent to 8 percent on Tuesday and a firming trend on other Asian bourses, following overnight gains on the US market on easing concerns over Europe's debt crisis.

In the Asian region, the Hong Kong's Hang Seng Index rose by 0.94 percent and Japan's Nikkei Index was up by 1.67 percent in morning trade on Wednesday. The US Dow Jones Industrial Average ended 1.50 percent higher in Tuesday’s trade.