The Sensex advanced by 263.06 points or 0.69%, to hit a new high of 38,210.94, breaking its previous record of 38,076.23 reached on 9 August.
The gauge had gained 284.32 points in the previous session on Friday.
NSE Nifty too breached the 11,500 mark, by surging 46.50 points, or 0.40%, to 11,517.25, surging past its previous (intra-day) high of 11,495.20 on 9 August.
Besides, fresh inflows by foreign funds and persistent buying by domestic institutional investors (DIIs) and rupee recovery also boosted investor sentiment here, brokers said.
The market rally was powered by strong gains in capital goods, metal, realty, infrastructure, PSU, oil and gas, healthcare, auto, and banking stocks, rising up to 2.78%.
Major gainers that helped key indices scale new highs include L&T, ONGC, Yes Bank, Coal India, Tata Motors, Tata Steel, Wipro, Vedanta, SBI, RIL, HUL, HDFC Ltd, Hero MotoCorp and HDFC Bank, rising up to 4.17%.
Meanwhile, Infosys, Bharti Airtel, ITC, and TCS were trading in the red, falling up to 2%.
Domestic institutional investors (DIIs) bought shares worth a net of Rs 151.89 crore, while foreign portfolio investors (FPIs) bought shares worth a net of Rs 147.31 crore on Friday, provisional data showed.
Traders said positive cues from other Asian markets, tracking gains on the Wall Street fuelled by hopes for an easing of the trade row between the China and the US, influenced sentiments here.
Elsewhere in Asia, Hong Kong’s Hang Seng rose 0.38%, while Shanghai Composite Index gained 0.15% in their early deals. Japan’s Nikkei, however, fell 0.33%.
The US Dow Jones Industrial Average ended 0.43% higher on Friday’s trade.