Positive cues from Asian peers also boosted sentiment.
The Sensex touched a high of 15,998 and finally ended up 15,971 - up 232 points or 1.5%.
Nifty ended up 65 points at 4,779.
Markets are likely to be volatile this week as traders roll over positions in futures & options (F&O) segment on Thursday.
Elsewhere in Asia, Nikkei surged 1% to 8,479 as it tried to catch up with the global rally after Friday's holiday.
Meanwhile, Seoul Composite and Shanghai Composite dropped 0.5% each.
All the sectoral indices were in the green with IT index gaining 2.3% to 5,812.
Realty, auto and power indices also moved up.
However, the healthcare space showed some weakness as the index dropped marginally to 5,856.
IT shares gained on the back of better-than-expected economic data released in the US Friday. US is the biggest market for IT companies.
TCS surged 2.7% to Rs 1,188. Infosys added 3% and Wipro went up by a marginal 0.3%.
Telecom stocks moved up after TDSAT stayed DoT 3G roaming ban order and said no coercive steps should be taken against companies until order.
Idea shot up 4.4% to Rs 82 while Bharti surged 4.3% to Rs 345. Reliance Communications was up 3.5% at Rs 69 on reports that the company is in the final stages of talks to sell its tower unit.
Metal shares were in the green. BSE metal index gained 1.4% to 9,664. Tata Steel added 3%,
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