The indices rose on Tuesday as cement stocks gained on the federal government's plan to spend an extra 250 billion rupees on roads, ports and defence projects and provide interest-free loans to states to beef up infrastructure.
To boost demand, the government will also allow its employees to spend tax-exempt travel allowances on goods and services, Nirmala Sitharaman, India's finance minister, told a news briefing on Monday.
The NSE Nifty 50 index rose 0.40 per cent to 11,978.35, while the S&P BSE Sensex was up 0.35 per cent at 40,741.49.
The Nifty Infrastructure index rose nearly 1 per cent and was the top gainer among sub-indexes as Ultratech Cement added 3.2 per cent and Shree Cement 2.5 per cent.
However, some analysts said the rise in stocks was likely to be short-lived.
“There is a lift in sentiment for infra stocks, but the requirement is much higher and these moves are very temporary,” said Rahul Sharma, market strategist and head of research at Equity99 markets.
The Nifty IT index rose for the 12th straight session as investors, boosted by strong results and a buyback from Tata Consultancy Services, expected good numbers from Infosys Ltd, which is set to report on Wednesday.
Shares of Wipro Ltd, which will report results later in the day, fell 0.2 per cent after rising 5.5 per cent since it announced a buyback plan.
Meanwhile, hopes of more interest rate cuts to boost the economy were dashed as India's retail inflation picked up in September to 7.34 per cent, with food prices surging ahead of the festival season.