Market benchmark BSE Sensex rallied over 269 points to hit its intra-day peak of 40,434.83 in early trade on Monday led by gains in ICICI Bank, RIL, ITC, TCS and HDFC Bank amid positive global cues and unabated foreign fund inflow.
Similarly, the broader NSE Nifty advanced 75.85 points to 11,966.45, inching closed to the 12,000 mark.
Top gainers in the Sensex pack included Vedanta, Tata Steel, ICICI Bank, Tata Motors, SBI, HCL Tech, Sun Pharma and Bharti Airtel, rising up to 3.20 per cent.
On the other hand, Yes Bank, Infosys, Hero MotoCorp, Bajaj Auto and HUL fell up to 4.80 per cent.
In the previous session, the 30-share Sensex settled 35.98 points, or 0.09 per cent, higher at 40,165.03. The Nifty advanced 13.15 points, or 0.11 per cent, to close at 11,890.60.
Foreign institutional investors (FIIs) purchased a Rs 533.37 crore in the capital market, on Friday, while domestic institutional investors sold shares worth Rs 136.50 crore, data available with stock exchange showed.
According to experts, better liquidity from FIIs and mutual funds will maintain a positive sentiment in the market given de-escalation in geopolitical risks and focus on upcoming reforms to revive growth.
Globally, bourses in Shanghai, Hong Kong and Seoul were trading higher on optimism over the US-China trade deal after China's commerce ministry on Saturday announced that top Chinese and US trade negotiators "reached consensus on principles".
Indices in Tokyo, however, were in the red.
Shares on Wall Street too ended higher after data showing the US economy continued to add jobs at a steady clip despite turbulence from the trade war with China.
On the currency front, the rupee appreciated 16 paise against the US dollar to trade at 70.65 in early session.
Brent futures, the global oil benchmark, fell 0.53 per cent to USD 61.36 per barrel.