Markets ended near the day's high Monday led by software shares, index heavyweight Reliance Industries and telecom major Bharti Airtel.
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%, followed by JSW Steel, Coal India and Sterlite.
"Most metal stocks are in downtrends.
Unfortunately, they are declining quite steadily and do not look oversold, so except for the fact that the market itself is probably in a short-to-medium term uptrend, there is little to be positive about in these stocks.
Long term resistance for STERLITE is around 110, TATASTEEL's is around 420, HINDALCO around 140 and JSWSTEEL around 600.
This is the maximum upside possible for these stocks, if any and buying is not advised. "Once the short term uptrend in the market ends, the stocks could continue to make newer lows," pointed out Hormuz Maloo, Technical Analyst, Geojit BNP Paribas Securities.
Among other shares, GVK has zoomed 8% to Rs 11.88 after reports that Singapore's Changi Airport may take a stake inj GVK Airports for Rs 2,200 crore.
ARSS Infrastructure Projects was locked at its 5% upper circuit at Rs 115.75 for the second straight session after its board approved the proposal of Corporate Debt Restructuring System Pantaloon Retail and Lovable Lingerie gained between 1-2% on short covering.
IRB Infra gained 1.5% to Rs 142. NHAI has terminated concession agreement of four laning of Goa/Karnataka border to Panaji.
On the other hand, sugar stocks were under pressure on the bourses on reports that the announcement of poll schedule in Uttar Pradesh and four other states may delay the government's approval for further sugar exports.
Balram pur Chini slipped 5.4%, Bajaj Hindustan shed 1.5% and Shree Renuka Sugar dropped 1% in trades.
The market breadth on the BSE was also strong with 1,735 shares gaining and 971 shares declining.