The S&P BSE Sensex settled 292 points higher to close at 28,095 and the Nifty50 ended up 94 points at 8,636.
In the broader market, the BSE Midcap and Smallcap indices ended up 1% each. Market breadth ended positive with 1728 gainers and 987 losers on the BSE.
"Today was an good day for investors and traders and last week’s consolidation in Nifty helped it comfortably cross its 8600 resistance mark. Markets were boosted by the likelihood of passage of the GST bill.
"Additionally good reports on the progress of crop plantation and strong monsoon further added to the positive bias.
"There were positive cues on the global front too, with no nervousness indicated for the upcoming policy meetings of the US Fed and Bank of Japan. Barring a handful, almost all Nifty counters were up.
"Indications are clearly bullish and we expect a good week ahead for market participants," says Jayant Manglik, President, Retail Distribution, Religare Securities.
Meanwhile, investors will closely follow important cues this week like July F&O expiry, GST bill in the ongoing monsoon session of parliament and the US Fed meet.
Back home, Bajaj Corp, Canara Bank, Indiabulls Housing Finance, Tata Sponge Iron and Texmaco Rail & Engineering will announce their first quarter earnings today.
Foreign institutional investors remained buyers with net equity purchases of Rs 438 crore on Friday, as per provisional stock exchange data.
Financials were led by mortgage lender HDFC which rose 1.9% followed by ICICI Bank, HDFC Bank and SBI which rose 1.1%-2.7% each.
IT exporters TCS and Infosys closed 0.7%-1.7% higher amid robust US economic data while a weaker rupee also aided sentiment.
The Supreme Court has asked Cipla to deposit Rs 175.07 crore within a period of six weeks with regard to cases pertaining to overcharging of certain drugs. The stock ended nearly 1% higher.
Vedanta and Cairn India hit 52-week highs after Vedanta sweetened the terms of the deal for the merger of Cairn India with Vedanta. Cairn India gained nearly 4% while Vedanta ended nearly 2% higher.
Dr Reddy's Labs ended down over 3% ahead of its June quarter earnings on Tuesday.
Among others, state-owned oil marketing companies touched their fresh lifetime highs on renewed buying interest after a foreign brokerage upgraded the stocks and the proposed plan by the government to merge 13 oil firms to create a conglomerate. HPCL, BPCL and IOC ended up 2%-4% each.
State-owned oil explorer ONGC gained nearly 2%.
Paper manufacturers ended higher by up to 20% Seshasayee Paper and Boards reported robust earnings for the quarter ended June 30, 2016.
Seshasayee Paper and Boards, Shreyans Industries, West Coast Paper and Emami Paper gained over 8% each.
Ballarpur Industries, International Paper APPM, Tamil Nadu Newsprint, Kuantum Papers, JK Paper and Star Paper Mills ended up between 5%-10%.
Image: Stock traders. Photograph: Reuters