Shares rallied to their highest level in nearly 11 months on Monday, tracking a rise in global markets after strong US monthly jobs data reassured investors about the health of the world's largest economy.
The US economy added 287,000 jobs last month, the highest total in eight months, smashing the consensus forecast of 175,000.
Investors now focus on corporate earnings, which they expect to be largely positive, for further direction. Blue chips Tata Consultancy Services Ltd and Infosys Ltd are scheduled to report their quarterly results later this week.
They also hope that the Government would be able to pass a revamped goods and services tax bill in the monsoon session of parliament which starts on July 18.
"Besides earnings, investors are also betting on prospects of the goods services tax (GST) bill getting passed, monsoon progress and positive fund flows," said Gaurang Shah, vice president, Geojit BNP Paribas Financial Services.
The broader NSE Nifty gained 144.70 points or 1.74 per cent to 8,467.90 while the benchmark BSE Sensex finished 499.79 points or 1.84 per cent higher at 27,626.69.
Both indexes hit their highest levels since August 20, 2015.
Banks were among the leading gainers, with the Nifty Bank Index gaining as much as 2.08 per cent. Bank of India rose as much as 5.46 per cent, while ICICI Bank Ltd advanced as much as 3.62 per cent.
Midcaps also rallied, with the NSE midcap 100 index rising to a record high.
Bajaj Finance Ltd rose as much as 6.2 per cent to a record high, after the company said it would consider sub-division of equity shares.
Sun Pharmaceutical Industries Ltd gained as much as 1.7 per cent after the company said it launched its ready-to-administer cancer drug, Gemcitabine InfuSMART, in Europe.
Auto maker Tata Motors Ltd rose as much as 4.4 per cent, after the company on Friday posted a 21 per cent rise in global vehicles wholesales for June.
Volatility was down 1.72 per cent with the India Vix at 14.8225.
Satisfactory progress of the monsoon in the country so far has also improved sentiment.
Global markets
European shares rose for the third straight session on Monday helped by a rally in shares of steelmakers and financials. ThyssenKrupp, up 5.6 per cent in early trading, rose after it confirmed it was in talks with Tata Steel over sector consolidation. The pan-European STOXX 600 index rose 0.8 per cent. It is still down about 10 per cent so far in 2016, having lost ground after Britain's shock vote last month to leave the European Union. ThyssenKrupp, Germany's biggest steelmaker, said it was in talks with Tata Steel about a consolidation of beleaguered European steel mills that are hit by overcapacity, weak demand and cheap imports.
Japan's Nikkei share average jumped 4 per cent on Monday after US stocks rose and the country's ruling coalition won a landslide victory in upper house elections, boosting confidence in the market. The Nikkei ended at 15,708.82 points, a one-week closing high, after earlier touching its highest intraday levels since June 24.
The US Dow Jones Industrial Average ended 1.40 per cent higher on Friday.