The BSE benchmark Sensex surged 131 points to end at a new peak of 28,177.88 on heavy buying by foreign funds and retail investors despite weak global cues.
Similarly, the NSE index Nifty gained 41 points to end at a record high of 8,430.75.
Barring metal and healthcare, all other BSE sectoral indices ended in the green. Among them, India infrastructure index was the star-performer and was up 1.85 per cent, followed by power 1.54 per cent, auto 1.43 per cent and PSU 1.41 per cent. Only metal index was down 0.55 per cent and healthcare 0.15 per cent.
SBIN, Tata Motors, Hero MotoCorp, NTPC and Reliance were the top five Sensex gainers, while the top five losers were ICICI Bank, HDFC Bank, Coal India, SSLT and M&M.
European shares dropped on Monday, hit by concern over the pace of global growth after data showed Japan, the world's third-largest economy, unexpectedly slipped into recession.
Shares in Hennes & Mauritz bucked the trend, rising 1.3 per cent after the world's second-biggest fashion retailer posted a 14 per cent rise in October sales from a year ago, beating forecasts.
At 0853 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,339.92 points.
Tokyo's Nikkei index tumbled 3 per cent, its biggest one-day slump since August.
Japan's economy shrank an annualised 1.6 per cent in July-September, following a 7.3 per cent drop in the second quarter in the wake of a sales tax hike that clobbered consumer spending.