The BSE Sensex soared 209 points to close at 35,692.524, while the broader NSE Nifty reclaimed the key 10,800-mark.
Asian markets advanced after North Korean leader Kim Jong-un agreed to work towards "complete denuclearisation of the Korean Peninsula" following his landmark summit with US President Donald Trump in Singapore.
Building up of positions by participants ahead of IIP and inflation data also influenced trading sentiments here, brokers said.
Healthcare counters saw robust buying triggered by attractive valuations, they added.
The BSE Sensex stayed in the positive terrain throughout the session and hit a high of 35,743.08 before ending at 35,692.52, higher by 209.05 points, or 0.59 per cent.
This is its highest closing since February 1, when the index had closed at 35,906.66.
The broader NSE Nifty scaled a high of 10,856.55 before closing up by 55.90 points, or 0.52 per cent, at 10,842.85 -- its highest close since February 1, when it had settled at 11,016.90.
Meanwhile, domestic institutional investors (DIIs) bought shares worth a net Rs 1,062.82 crore, while foreign portfolio investors (FPIs) sold equities worth Rs 1,156.77 crore yesterday, according to provisional data.
"Market edged higher supported by positive outcome from US-North Korea summit which may lead to an end of conflicts in Korean peninsula.
"However, global market remains mixed ahead of Fed, ECB and BoJ policy meeting during the week. A 25 bps rate hike from US Fed is largely factored in by the market but any hawkish comment of rate cycle may dent the sentiment," said Vinod Nair, Head of Research, Geojit Financial Services.
Dr Reddy's topped the gainers' chart in the Sensex pack, rallying 5.23 per cent, followed by SBI at 3.36 per cent.
Other winners were IndusInd Bank 2.41 per cent, HUL 2.41 per cent, Hero MotoCorp 2.11 per cent, TCS 1.74 per cent, Adani Ports 1.65 per cent, L&T 1.58 per cent, RIL 1.32 per cent, Sun Pharma 1.03 per cent, Kotak Bank 0.84 per cent and Wipro 0.79 per cent, among others.
However, Bharti Airtel fell 1.98 per cent, while Tata Steel lost 1.52 per cent on profit-booking.
Coming to sectoral indices, healthcare rose 1.94 per cent, followed by capital goods 1.19 per cent, FMCG 0.73 per cent, PSU 0.71 per cent, bankex 0.69 per cent, IT 0.59 per cent, infrastructure 0.53 per cent, teck 0.35 per cent, consumer durables 0.35 per cent, realty 0.31 per cent and oil and gas 0.28 per cent.
Broader markets too were in a better shape, with the BSE mid-cap and small-cap indices gaining 0.90 per cent and 0.54 per cent.
In the Asian region, Japan's Nikkei rose 0.33 per cent, Shanghai Composite Index gained 0.89 per cent and Hong Kong's Hang Seng advanced 0.13 per cent.
In Europe, Frankfurt's DAX gained 0.60 per cent, while Paris CAC 40 rose 0.40 per cent in early trade. London's FTSE edged up 0.30 per cent.