Share prices have hit an all-time high

The BSE sensitive index (Sensex) rose immediately after trading opened.

The gains were led by India's largest private company, Reliance Industries which rose by nearly 2%, and the state-owned oil giant, ONGC.

Analysts say the boom is being spurred by foreign investors who are pumping money into the Bombay stock market.

"There is a lot of money flowing in as investors are blindly buying stocks... foreign investors too are buying in to emerging markets," Hemen Kapadia, analyst with Morpheus Incorporated, told the BBC News website.

Agriculture is doing well and that means rural India will have more spending power than before Sunil Choksey Stockbroker

"India tops that list."

A good monsoon in most parts of India has also helped, say stockbrokers.

"Agriculture is doing well and that means rural India will have more spending power than before," says Sushil Choksey of Rosy Blue Securities.

Strong performance

India's economy, one of the fastest growing in the world, is forecast to grow by 7% this year, despite concern over rising oil prices.

The strong market performance has come as a boost to India's Congress-led coalition government, which is under pressure from its Communist allies to roll back some of its economic reform plans.

Just over a year ago, when the party was voted to office, Indian share prices recorded their biggest ever fall in a single day's trading over concerns that the new government would stall economic reforms.

"Black Monday" wiped billions of dollars off the value of India's listed companies.

But India has continued to enjoy strong economic growth boosted by growing exports and further market reforms.