The buying took place mainly in realty, metal, capital goods, oil and gas and IT sector stocks.
Rising for the third straight session, the 30-share index gained 69.59 points, or 0.33 per cent, to 20,920.33. In the past two sessions, Sensex had gone up by 656.34 points.
The National Stock Exchange index Nifty traded 18.80 points, or 0.30 per cent, higher at 6,207.80.
Brokers said sentiments remained firm on sustained buying by participants driven by the RBI’s plans to inject Rs 8,000 crore into the financial system to ease liquidity and further strengthen the rupee.
In the Asian region, Hong Kong’s Hang Seng rose 0.53 per cent, while Japan’s Nikkei shed 0.73 per cent in early trade today.
The US Dow Jones Industrial Average ended 0.09 per cent higher after crossing 16,000 points for the first time in yesterday’s trade.