Shares traded higher on Tuesday, with the Nifty trading above 17,800 for the first time since April 8, helped by softening consumer inflation that eased for a third straight month in July.
Nifty was up 0.7% around 17,830, in early trade, while Sensex was 0.7% higher at around 59,900. Indian markets were closed on Monday on account of Independence Day.
"Inflation data has helped the mood and foreign investors are back in the market," said Saurabh Jain, assistant vice-president, research, at SMC Global Securities, adding that cooling local commodity prices boosted outlook for second-half of the fiscal year 2022/23.
India's consumer inflation dipped to 6.71% in July, aided by a slower increase in food and fuel prices and adding to expectations that the central bank may rein in the pace of its policy rate hikes from next month.
Auto stocks were up and the Nifty Auto hit a record high with its 1.8% gain.
Shares of Hero MotoCorp rose as much as 3% after strong June-quarter results.
Life Insurance Corporation of India rose 2.5% after the country's biggest insurer posted a 20% jump in June-quarter premium income on Friday.
Meanwhile, Asian stocks struggled for direction, weighed down by worries over global growth following weak China data that knocked oil prices and commodity-linked currencies.
India's currency and debt markets remained closed on Tuesday on account of Parsi New Year.