Market observers said expectations of further announcements by the government on taxation to spur growth and low crude oil prices also lifted the market.
Domestically, healthy buying was observed in automobile, capital goods, banks, oil & gas and metal stocks, whereas telecom scrips came under selling pressure.
The S&P BSE Sensex closed at 39,831.84 points, 581.64 points or 1.48 per cent higher from the previous close of 39,250.20 points. Opening at 39,293.49 points, the market oscillated between intra-day high of 39,917.01 points and low of 39,254.12 points.
Similarly, the Nifty50 of the National Stock Exchange closed at 11,786.85 points, up 159.70 points or 1.37 per cent over its previous close.
"The markets have gained momentum on the back of several positive developments. Globally, there was news of the US reaching phase-one trade deal with China early next month," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
"On the domestic front, news flows regarding the government looking at simplifying various taxes related to equities to boost sentiments and revive the investor confidence," Khemka said.
According to Vinod Nair, Geojit Financial Services' Research Head, a strong momentum is seen in the market as healthy Q2 earnings from big corporate and attractive valuation for mid- and small-caps is providing a favourable risk-reward to investors.
"The clouds over the global market is gradually settling down with developments in trade deal and Brexit, while rate cut expectation from the US Fed will further add impetus to emerging markets, like India," Nair said.
On technical levels, HDFC Securities' Retail Research Head Deepak Jasani said the short term uptrend of the Nifty remained intact. "Further upsides are likely once the immediate resistance of 11,824 is taken out. Crucial supports to watch for resumption of weakness are at 11,708-11,632."
( With inputs from IANS )