The BSE 30-share index surged 227.44 points, or 0.75 per cent, to 30,692.36 points. The gauge had gained 30.13 points in the previous session on Friday.
All sectoral indices led by FMCG, realty, capital goods, metal and auto were in the green, rising up to 1.76 per cent.
Also, the NSE Nifty gained 62.55 points, or 0.66 per cent, to 9,490.45 points.
Trading sentiment got a boost after the defence ministry last week broadly finalised a policy under which select private firms will be roped in to build military platforms like submarines and fighter jets in India in partnership with foreign entities.
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Engineering and construction giant Larsen & Toubro rose 1.34 per cent to Rs 450.60.
Adani Ports rose by 1.75 per cent and TCS by 1.5 per cent. Tata Motors and Bharti Airtel rose by around 1 per cent in early trade.
ICICI Bank, Infosys and Reliance Industries were also trading with gains of up to 1 per cent.
Among other stocks, BEL and BHEL too were up by 2.12 per cent. Reliance Defence and Engineering was up 2.28 per cent.
State Bank of India, which posted two-fold jump in net profit for the last quarter of FY2016-17, was trading down by over 1 per cent due to profit booking by investors after a recent rally in the stock.
Firming trend at other Asian markets cheered by the weekend rally at the Wall Street mainly accelerated buying activity on the domestic bourses, brokers said.
Sustained buying by domestic institutional investors too influenced sentiments, they added.
In other Asian markets, Hong Kong's Hang Seng was up 0.75 per cent, while Japan's Nikkei rose 0.30 per cent. Shanghai Composite Index, however, was marginally down by 0.11 per cent.
The US Dow Jones Industrial Average ended 0.69 per cent higher on Friday.