Metals, auto and banking shares were in the limelight in this session; the FMCG pack, however, ended lower.
A rate cut by China and uplifting US jobs data kept the momentum going for the markets.
The government's decision to ease its combative stance on MAT demand along, accompanied by a decline in global crude oil prices, hopes of a rate cut by Reserve Bank of India and the likelihood of a normal monsoon further boosted investor sentiment.
The Sensex ended at 27,507, higher by 401 points or 1.4% and the Nifty ended above the crucial 8,300 mark at 8,325, up 133 points.
The broader markets also had a good session of trade, with BSE Midcap index gaining 2.1% at 10453 and the smallcap indices gaining 1.2% at 10967.
The 30-share Sensex had zoomed by 506 points on Friday and considering today's gains of 401 points, the BSE benchmark has vaulted by 900 points in merely two trading sessions.
The sustainability of the ongoing upmove will, however, depend on favourable cues from the global front and a favourable domestic environment. On the macro-economic front, data on inflation based on consumer price index (CPI) for April will be unveiled on Tuesday.
On the same day, industrial production (IIP) data for March will also be released. Moreover, wholesale price index (WPI) data for April will be announced on Thursday.
Ashok Leyland, Dr Reddy's, Lupin, Cadila Healthcare and JSW Steel will announce their results this week.
RUPEE
Tracking the smart rally in local equities in noon deals, the rupee appreciated further by 16 paise to quote at 63.89 against the American unit at 1423 hours.
Sustained dollar selling by exporters and some banks, too, had a positive impact on the rupee, a forex dealer said.
GLOBAL MARKETS
Asian shares rose on Monday as investors cheered China's latest cut to interest rates to bolster its flagging economy and after Wall Street rallied on a robust headline reading for U.S. employment.
China cut its interest rates for the third time in six months on Sunday, and analysts predicted policymakers would relax reserve requirements and cut rates again in the coming months.
The Shanghai index spurted by nearly 3%, while the Hang Seng, Nikkei and Kospi indices added half a percent to one percent each.
The Europeans markets, however, edged lower as investors awaited the outcome of the Eurogroup finance ministers meeting on Greece in Brussels later in the day.
SECTORS & STOCKS
The metal sector was in the limelight in this session on hopes of pick-up in demand for commodities after China announced a cut in interest rates for the third time in six months on Sunday to stimulate growth. China is the world's largest consumer of steel, copper and aluminum.
The S&P BSE Metal Index had surged more than 4% in the past week alone and maintained the momentum in today's session.
Vedanta, Hindalco, Tata Steel and Coal India have gained 2-5% each. Banking shares, mainly public sector undertakings (PSU) banks, had a roaring session.
The Bank index surged by nearly 5% on hopes of a rate cut by Reserve Bank of India as retail inflation is expected to remain below 6% i.e. within the comfort zone of the central bank.
SBI, HDFC, Axis Bank and ICICI Bank gained 2-5% each.
Bank of Baroda (BOB) was the largest gainer in the PSU banking pack, soaring by 16% to Rs 169 on the BSE, after the state-owned bank said that the bank's assets quality improved during the quarter ended March 2015 on a sequential basis.
Mortgage lender Housing Development Finance Corporation (HDFC) gained 3.1% at Rs 1222 after emerging as the only Indian company among the world's 10 biggest consumer financial services firms, after giants like American Express, Visa and Mastercard.
From the auto space, Hero Moto, Tata Motors, Bajaj Auto and M&M gained 1-4% each. Domestic passenger car sales grew 18.14% to 1,59,548 units in April this year compared with 1,35,054 in the same month last year.
According to the data released by the Society of Indian Automobile Manufacturers (SIAM), motorcycle sales last month were down 2.77% at 8,81,751 units from 9,06,909 in the same month of the previous year.
The FMCG stocks, including Hindustan Unilever and ITC, however bucked the strong uptrend.
Among individual stocks, SBI zoonmed by 5.4% at Rs 276 to top the gainer's list on the BSE. Vedanta, Hero Moto Corp, HDFC and Tata Motors gained between 3% and 5% each.
The market breadth was strong, with 1754 advancing stocks as against 974 declines.