Titan was the top gainer in the Sensex pack, rising over 3 per cent, followed by M&M, Reliance Industries, Axis Bank, TCS, Maruti and Infosys.
NSE Nifty surged 122.10 points to 15,885.15.
Equity benchmarks opened the week with robust gains on Monday as strong corporate results, supportive macroeconomic data and a bullish trend overseas turbocharged sentiment.
Auto stocks were propelled by recovery in July sales numbers, while IT counters also saw brisk buying.
The 30-share BSE Sensex rallied 363.79 points or 0.69 per cent to finish at 52,950.63, while the broader NSE Nifty surged 122.10 points or 0.77 per cent to 15,885.15.
Titan was the top gainer in the Sensex pack, spurting 3.25 per cent, followed by M&M, Reliance Industries, Axis Bank, TCS, Maruti and Infosys.
HDFC gained 0.88 per cent after the country's largest mortgage lender reported a 31 per cent jump in its consolidated net profit at Rs 5,311 crore for the June quarter.
On the other hand, Tata Steel, Bajaj Finserv, Bajaj Finance, NTPC, Dr Reddy's and HDFC Bank were among the laggards, shedding up to 1.66 per cent.
Domestic equities recovered sharply as positive cues from global equities and strong rebound in auto supported benchmarks, said Binod Modi, head-strategy at Reliance Securities.
Further, modest recovery in financials, IT and pharma also supported market, he said, adding that realty stocks were in focus after sharp improvement in property registrations in Mumbai for July, while decent improvement in monthly auto sales volume aided original equipment manufacturers (OEMs).
He further noted that most key sectoral indices traded in green, while volatility index broadly stood flat.
On the macroeconomic front, India's manufacturing sector activities witnessed the strongest rate of growth in three months in July amid improved demand conditions and easing of some local COVID-19 restrictions, a monthly survey said on Monday.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose from 48.1 in June to 55.3 in July -- the strongest rate of growth in three months.
"Tracking global sentiments, vibrant domestic sectors like realty, auto, IT and chemicals provided an edge to Indian equities.
"Recovery is seen in July auto sales and an improved outlook for real estate due to a surge in property registrations helped these sectors to trade higher.
"$1 trillion infrastructure spending package in the US provided better prospects to the core economy, aiding global markets to start the month on a strong footing," said Vinod Nair, head of research at Geojit Financial Services.
All sectoral indices ended with gains, with BSE realty, oil and gas, energy, consumer durables and auto indices climbing as much as 4.88 per cent.
Broader BSE midcap and smallcap indices rose up to 1.07 per cent.
World stocks were boosted by the $1 trillion infrastructure spending bill in the US and a raft of positive corporate results.
Elsewhere in Asia, bourses in Shanghai, Seoul, Tokyo and Hong Kong ended with significant gains.
The rupee gained 8 paise to close at 74.34 against the US dollar on Monday, supported by a firm trend in domestic equities and a weak American currency overseas.
Photograph: Utpal Sarkar/ANI Photo