The 30-share Sensex ended 523 points higher at 28,785 after hitting fresh all-time high level of 28,829.29 and the 50-share Nifty closed up 145 points at 8,695 after touching life-time high level of 8,707.90.
In the broader market, both the BSE Midcap and Smallcap indices underperformed the front-liners with gains of around 0.4% each.
Market breadth in BSE ended positive with 1,556 advances against 1,417 declines.
Among global cues, the International Monetary Fund has slightly cut projections for India's economic growth to 6.3% for 2015-16 against 6.4% made in October last year, while retaining the forecast for the current financial year at 5.6%.
In its World Economic Outlook Update, IMF pegged the country's growth rate at 6.5% for 2016-17.
IMF predicted the world economic growth at 3.5% in 2015 and 3.7% the next year.
US was projected to grow 3.6% in 2015 and 3.3% the next year, higher by 0.5 percentage points and 0.3 percentage points compared to the October projections.US is the largest importers of India's goods.
Further, foreign institutional investors were net buyers in Indian equities worth Rs 433.72 crore on Monday, as per provisional stock exchange data.
Buzzing Stocks
Ten of the 12 sectoral indices of BSE ended in green. BSE Metal index, ended over 3% was the lead gainer following better-than-expected fourth quarter Chinese GDP data.
BSE Bankex gained 1.8%, BSE FMCG index gained around 1.7% and BSE Oil & Gas ended higher by 1.3%.
Metal stocks surged in today’s session after China's economic growth steady at 7.3% in the fourth quarter allayed concerns over a slowdown in Chinese economy.
Sesa Sterlite and Tata Steel gained around 5.4% and 4.5% each while Hindalco ended up 2.8%.
Mortgage finance major, HDFC gained around 6%.
According to analysts housing finance companies (HFCs) have become more competitive than banks in a low interest rate environment given the reduction in cost of funds for banks will be lower than cost of fund reduction for HFCs.
Among bank shares, Axis Bank gained over 4%, SBI gained around 1.5%, ICICI Bank gained around 2% and HDFC Bank gained over 1%.
The Central Bank has revised guidelines on base rates. RBI has asked lenders to "ensure price differentiation that is consistent with its credit pricing policy".
This means in case a bank changes the spread while keeping the base rate unchanged, both new and old customers will get the benefit of lower interest rates.
Index heavyweights like ITC, up around 3.5%, RIL up around 2.4% and Infosys up around 1% also ended higher.
Auto stocks remained subdued in today’s session with the exception of Tata Motors which ended higher around 4%.
FMCG major, HUL pared losses to end higher by 0.4%. According to media reports, the company will roll out its premium ice-cream Magnum in five more cities.
Among other shares, South Indian Bank dipped around 4% in otherwise firm market after the private sector lender has reported disappointing set of numbers for the third quarter ended December 31, 2014 (Q3FY15).