The 30-share BSE index soared 1,128 points or 2.30 per cent to close at 50,137; while the broader NSE Nifty moved 338 points or 2.33 per cent higher to settle at 14,845.
Top gainers in the BSE pack included HCL Tech, HDFC Bank, NTPC, Nestle India, TCS and Hindustan Unilever with their stocks up as much as 3.98 per cent.
On the NSE platform, except for Nifty Realty, all other sub-indices ended in green with Nifty IT and Nifty Metal up as much as 2.90 per cent.
Banking and financial stocks surged after steel conglomerate JSW Steel completed an insolvency process, allowing lenders to recover some of their bad loans.
JSW Steel said on Friday it completed a resolution plan for Bhushan Steel and Power, including a payment of Rs 19,350 crore ($2.66 billion) to financial creditors.
“The JSW Steel resolution has given impetus to the banks as many of them were lenders to the bankrupt company,” Anita Gandhi, director at Arihant Capital Markets, told news agency Reuters.
Domestic financial markets were closed on Monday for Holi.
In the previous session on Friday, sensex had surged 568 points or 1.17 per cent to finish at 49,009, and Nifty climbed 182 points or 1.27 per cent to 14,507.
Meanwhile, foreign institutional investors (FIIs) were net sellers in the capital market as they offloaded shares worth Rs 50.13 crore on Friday, as per exchange data.
(With inputs from agencies)