The Sensex rose 47 points to close at 35,739 in see-saw trade, led by gains in software exporters and healthcare stocks.
Buying picked up after official data showed industrial output expanded by 4.9 per cent in April this year, spurred by higher growth in manufacturing and mining sectors.
However, concern prevailed over retail inflation inching up to 4.87 per cent in May on increase in food prices.
In past two days, the Sensex gained 248.85 points.
Similarly, the broader 50-issue NSE Nifty ended higher by 13.85 points, or 0.13 per cent, at 10,856 after moving in the range of 10,893 and 10,842.
Dr Reddy's, TCS and SBI were top gainers on the Sensex.
Market breadth was marginally negative with 1297 stocks closing higher against 1380 ending in the red.