The BSE index gained 610.80 points to close at 33,917.94, while the broader 50-share NSE Nifty went up by 197.05 points to finish trading at 10,423.90.
Non-farm payrolls data in the United States, which was released on Friday, showed that the economy had added 3,13,000 jobs in the past month, Reuters reported.
Brokers said fresh buying by investors ahead of inflation data improved the market sentiment. The markets witnessed gap-up opening as indicated by SGX Nifty.
Posting its biggest single-day gain since March 2016, the battered BSE Sensex on Monday soared by 611 points following a relief rally in global markets on growing prospects for the USA economy. The government will announce inflation data based on consumer price index (CPI) for February and industrial production data (Index of Industrial Production, IIP) for January later in the day.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,370 stocks lost ground as against 1,346 gainers on Monday. A total of 186 shares were unchanged.
Last week, the Indian equity markets were engulfed by bears as global trade war fears following US President Donald Trump's proposal to impose tariff on import of metals, along with the turmoil in the domestic banking sector, continued to erode the risk-taking appetite of investors.
At home, the GST council sent out a positive signal to the export community by deciding to extend the available tax exemptions on imported goods for a further six months beyond 31 March 2018, he said.
Risk appetite improved after USA data showed nonfarm payrolls jumped by 313,000 jobs last month, but annual growth in average hourly earnings slowed to 2.6 percent after a spike in January.