PartyGaming, which recently lost a third of its value after warning growth in the sector was moderating, closed 7.2 percent higher after 888.com reported a jump in quarterly revenue and said concerns about the sector were unjustified.
Property companies were well-represented in the blue chip gainers' list, with Hammerson and British Land both closing 3 percent higher after investment bank J.P. Morgan raised its ratings for the stocks.
The main index closed 27.0 points higher at 5,344.3, adding to Monday's gain, which was the biggest single day's points advance since 2003 as a rash of bids emerged, convincing investors of the value in UK stocks since a recent 7 percent drop from 4-year highs.
"Equities look cheap. What the bids do is bring that into focus and highlight the fact that if investors aren't out there putting money to work in the equity market then perhaps there are buyers who will and that's the corporate sector," said Alex Scott at private client money manager Seven Investment Management.
He added that the background to the equity market remained solid with reasonable earnings growth coming through and concerns about a slowdown following damaging US hurricanes abating.
"We may have got over the yips, I wouldn't rule it out. Our feeling throughout was that equities were too cheap to be selling. You see more and more people declaring that the worst is over, looking to increase equity weightings," he added.
Traders said a key US Federal Reserve committee meeting later on Tuesday was widely expected to push interest rates up by another 1/4 point, but that this was reflected in prices and investors would look closely at any Fed statement with its decision.
Traders say any Fed indications that a hawkish stance on rates might continue into the New Year could prompt fresh selling.
"The likely outcome, which is in the market, is that the Fed says it keeps its (tightening) stance instead of moving to a neutral one, implying that there is more to go for," said a trader.
Monday's wave of bid approaches to companies including mobile phone groupO2, ports company P&O and glassmaker Pilkington had buyers looking out for further potential bid candidates, including gas firm BG Group, up 4.2 percent.
"That is fuel on the fire and they have gathered strength all day," said a dealer, noting continued speculation relating to a possible move from Royal Dutch Shell.
Rentokil was among the minority of fallers, off 1.8 percent as Citigroup repeated a "sell" rating on the stock and said the pest control-to-security firm was "structurally challenged", in a note released ahead of a trading update on Thursday.
"We think that to resuscitate its growth prospects, management will have to cut prices and margins," the investment bank said.
Airports group BAA closed 1.1 percent lower after it said it was to cut 700 jobs under a cost-saving programme, although it posted higher first half earnings.
Back on the upside, Standard Chartered shares added 2.1 percent as investors reacted to positive feedback from an analyst trip the Asia-focused bank is holding this week and strong results from a Korean rival.
Computer services firm Computacenter was the biggest midcap faller, down 3.3 percent after brokerage Cheuvreux UK lowered its rating citing US computer maker Dell's revenue shortfall.