Sensex resumed higher at 17,313.05 and shot up further to 17,448.42. It was quoting at 17,420.51 at 1025 hrs, up 222.58 points or 1.29 per cent from last weekend's level.
The NSE 50-share Nifty also shot up by 65.20 points or 1.25 per cent to 5,280.90 at 1025 hrs.
Major Sensex gainers were Reliance Ind (4.40 pc), Tata Motor (2.97 pc), Tata Steel (2.46 pc), L&T (1.98 pc), Sterlite Ind (1.86 pc), Jindal Steel (1.59 pc) and ICICI Bank (1.52pc).
Provisional data showing that FIIs remained net buyers also boosted sentiment. FIIs bought shares worth Rs 208.69 crore on Friday as per figures on the stock exchanges.
Asian shares climbed in the early trade amid global stock rally triggered by stronger US economic data and optimism for progress in Europe.
Key indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by up to 2.05 per cent.