Additionally, hopes over a reduced bad debt burden on the banking sector and a stronger rupee buoyed investors sentiments.
Consequently, the S&P BSE Sensex closed 165.94 points or 0.42 per cent higher at 39,950.46 points, while the NSE Nifty50 was up 42.90 points or 0.36 per cent at 11,965.60 points.
Sectorally, the top gainers were the BSE metal, oil and gas, banking and telecom indices, whereas, the top losers were the BSE capital goods and FMCG indices.
"Markets ended with healthy gains on Tuesday. It was the third consecutive session of gains for the Nifty. The gains came on the back of positive global cues as investor concerns eased after the US shelved plans to impose tariffs on Mexico," said Deepak Jasani, Head of Retail Research, HDFC Securities.
"Technically, with the Nifty rallying further, the bulls remain in control. Further upsides are likely once the immediate resistance of 12,001 is taken out. Crucial support to watch for any weakness is at 11,904."
"Positive momentum was triggered in banking stocks based on report that system-wide NPA level has declined to 9.3 per cent in March 2019 from 11.5 per cent a year back," said Vinod Nair, Head of Research, Geojit Financial Services.
"Still the broad trajectory of the market remains indecisive and await fresh triggers in this expensive valuation. News of government stimulus in China boosted Asian and European equities while trade war concerns has also subsided marginally. A further tensions can emerge ahead of the G20 meet this month given the war of words exchanged between China and the US."
In terms of investment, both foreign and domestic institutional investors (FIIs/DIIs) sold stocks. FIIs bought stocks worth Rs 95.79 crore, while DIIs sold stocks to the tune of Rs 151.01 crore.
On the currency front, the rupee on Tuesday strengthened by 20 paise to 69.45 per US dollar from its previous close of 69.65.
( With inputs from IANS )