The Sensex recovered by 98 points, or 0.50 per cent, to close at 19,673.64 led by stocks of IT and metals.
The index had lost 160 points in the previous session.
Similarly, the broad-based National Stock Exchange index Nifty rose by 27.05 points, or 0.46 per cent, to 5,971.05.
Brokers said trading sentiments bolstered as the Reserve Bank of India cut key interest rates on Friday to give a push to the slowing economic growth.
They said foreign as well as domestic funds were seen enlarging their holding in fundamentally strong stocks available at attractive lower levels after recent bear phase.
A better trend in the Asian region and higher opening in Europe after more-than-expected rise in the US job data signalled improvement in global economy, was another supporting factor, they added.
The two most-heavy with nearly 16 per cent weightage on the Sensex, Reliance Industries and Infosys shot up by 2.53 per cent to Rs 821.50 and by 1.46 per cent to Rs 2,341.40, respectively.
The software major Tata Consultancy Services spurted by 3.25 per cent to Rs 1,464.85.
The metal sector index gained the most by rising 1.98 per cent to 8,960.04 on hopes of better realisations after the copper rose over six per cent on Friday, its steepest single day gain in 18 months.
The IT sector index was second best performer by rising 1.88 per cent to 5,991.62 as investors felt an improvement in global economy would boost demand.
The country’s software exporting companies get over 60 per cent from the US and European markets.
In 30-BSE index components, 21 stocks closed higher while nine ended with losses.