However, a strong demand for US dollars from importers coupled with domestic political uncertainty due to state elections and concerns over global growth limited the gains.
Buying was witnessed in FMCG and consumer durables stocks.
The index pivotals — finance and banking — gained 1.32 per cent and 1 per cent, respectively.
The S&P BSE Sensex settled up 373.06 points or 1.07 per cent at 35,354.08 points, from its previous close of 34,981.02 points. It touched an intra-day high of 35,397.24 and a low of 34,896.07.
The NSE Nifty50 gained 101.85 points or 0.97 per cent to finish the day at 10,628.60.
The overall market breadth on the BSE was negative, with 1,067 stocks advancing and 1,536 declining.
“Broad market indices like the BSE Mid-cap index gained less, thereby underperforming the main indices,” said Deepak Jasani, Retail Research Head, HDFC Securities.
According to Vinod Nair, Head of Research, Geojit Financial Services: “Market regained strength amid volatility, supported by positive global cues and improvement in domestic macros on account of sharp fall in crude and firming rupee.”
“Recapitalisation announcement of Rs 42,000 crore to PSU Banks is likely to provide respite to the current liquidity issues, which also boosted the sentiment.”
Heavy US dollar demand from importers weakened the domestic currency to Rs 70.87 against the greenback, from its previous close of 70.67.
“The recent appreciation in the rupee is a golden opportunity for the importers… Given the volatility and uncertainty in the global financial markets, importers are rushing to hedge their exposure for the next 2-3 months,” said Rishabh Maru, research analyst at Anand Rathi Shares and Stock Brokers.
Provisional data with the exchanges showed that foreign institutional investors bought stocks worth Rs 62.74 crore on Monday while the domestic institutional investors bought scrips worth Rs 351.78 crore.
Top gainers on the Sensex were Hero MotoCorp, up 5.02 per cent at Rs 3,062.10; Hindustan Uniliver, up 4.21 per cent at Rs 1,745.15; Wipro, up 3.71 per cent at Rs 318.85; Asian Paints, up 2.72 per cent at Rs 1,349.60 and Axis Bank, up 2.69 per cent at Rs 630.80.
The laggards were Yes Bank, down 3.89 per cent at Rs 187.95; ONGC, down 3.58 per cent at Rs 146.75; Sun Pharma, down 2.88 per cent at Rs 510.65; Coal India, down 2.36 per cent at Rs 250.70, and Vedanta, down 1.90 per cent at Rs 195.85 per share.