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BENGALURU - Indian shares ended higher on Tuesday, with the blue-chip Nifty index surpassing the 16,000 level for the first time, as investors bet on a faster recovery in Asia's third-largest economy following a devastating second COVID-19 wave.

The NSE Nifty 50 index ended up 1.55% at 16,130.75 and the benchmark S&P BSE Sensex rose 1.65% to 53,823.36.

"The (16,000) level is important. It will add to the confidence of investors, especially because in the last 2-3 weeks the trend was weak," said Vinod Nair, head of research at Geojit Financial Services.

"Earnings is providing a lot of support to the market. The economy is able to sustain itself in the new norm. The market is betting the COVID impact next year is going to be much lower," Nair said, adding that a slew of successful initial public offerings had also boosted retail investor confidence.

Indian e-commerce beauty company Nykaa plans to raise $500 million through its initial public offering, a source told Reuters, becoming the latest homegrown startup to pursue a listing on the domestic bourses.

Indian shares have more than doubled since hitting near four year-lows in March 2020 when the COVID-19 pandemic struck, as a market flush with liquidity saw strong foreign fund inflows and increased retail participation.

Indian equities have attracted a net $6.93 billion in foreign inflows this year as of July, despite outflows from other Asian stock markets, data from Refinitiv Eikon showed.

Domestic investors purchased a net $2.2 billion worth of equity mutual funds in the first half, compared with net selling of $5.34 billion in the second half of 2020, data from Refinitiv Lipper showed.

HDFC Ltd and Titan Company Ltd were top gainers on the Nifty 50 index, adding 3.8% and 3.9%, respectively.

The fast-moving consumer goods sub-index rose 1.73% and Nifty finance index gained 1.68%.