The Sensex, which rose for the fifth straight day, has closed at a new peak in each of last three sessions. Brokers said trading activity also picked up pace ahead of the expiry of monthly equity derivatives on Thursday.

Defence stocks were in the limelight and rose by up to 20 percent on Wednesday after government notified increase in FDI limit to 49 percent through approval route in the sector.

The benchmark S&P BSE 30-share Sensex resumed on strong footing and traded in a range between 26,599.12 and 26,492.50 before registering its fresh closing high of 26,560.15, a net rise of 117.34 points or 0.44 percent. It surpassed its previous closing peak of 26,442.81 logged on Tuesday.

The 50-issue CNX Nifty of the NSE also opened higher and moved in a tight range of 30 points before ending up by 31.30 points or 0.40 percent at 7,936.05 new closing peak. Its previous peak on closing basis was 7,913.20 (August 22).

"Positive global cues and likelihood for further monetary stimulus from European Central Bank (ECB) boosted the market sentiment stocks from oil and gas sector also gained on hopes of proper reforms for subsidies," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.

Sentiments remained upbeat after Oil Ministry said it will seek Cabinet nod for freeing diesel prices after retail rates achieve parity with global levels, and has proposed to cut subsidy payout by upstream firms like ONGC and Oil India by half, said Jayant Manglik, President-retail distribution, Religare Securities.

Most Asian indices rose tracking US stocks that jumped a new peak on Tuesday after data showed consumer confidence rose in August for a fourth straight month, to its strongest level since February 2008. Also, durable goods orders surged in July to a new monthly record.

Europe was under pressure with the FTSE (UK) mildly up as "Ukraine issue was in focus", said Kiran Kumar Kavikondala, Director and CEO, WealthRays Securities.

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