A benchmark index for Indian equities, the sensitive index (Sensex) of the Bombay Stock Exchange, closed 363.30 points, or 1.33 percent, as blue chips surged up after forecast of a timely monsoon.
Timely monsoon may help the Reserve Bank of India to lower interest rates in its June review.
The 30-share Sensex, which opened at 27,416.97 points, closed at 27,687.30 points -- up 363.30 points, or 1.33 percent, over the previous trading day's close at 27,324 points. It touched a high of 27,725.97 points and a low of 27,370.28 points in Monday's trade.
The wider Nifty of the National Stock Exchange also closed 111.30 points or 1.35 percent higher at 8,373.65 points.
As brokerage firm Sharekhan explained: "Bulls are back: Rate cut wish lifts spirits."
"Key benchmark indices closed higher for second straight session supported by broadbased rally among the frontliners on anticipation that RBI may slash the key policy rate in the upcoming monetary policy review on June 2, 2015," tghe firm said.
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It added: "Further, well-timed monsoon forecast and slowdown in foreign funds outflows has lifted the trading sentiments."
In Monday's trade, good buying was observed in consumer durables, oil and gas and healthcare sectors, while marginal selling pressure was seen in realty sector.
Among the 12 sector-specific indices of the Mumbai bourse, consumer durables index gained by 2.16 percent, oil and gas index moved up by 2.09 percent and healthcare index got augmented by 1.54 percent.
However, realty index dropped by 0.20 percent.
The 100-scrip and 200-scrip indices were up by 1.32 percent and 1.24 percent, respectively. Mid-cap index was higher by around 0.98 percent and small-cap stocks ended 0.97 percent higher.
The major Sensex gainers on Monday were: Dr.Reddy's, up 3.48 percent at Rs.3,613.25; GAIL, up 3.45 percent at Rs.392.80; Tata Power, up 3.08 percent at Rs.75.20; and HDFC, up 2.34 percent at Rs.1,262.85.
The losers were: Hero MotoCorp, down 0.31 percent at Rs.2,520.60; and NTPC, down 0.07 percent at Rs.136.05.
Among the Asian markets, Japan's Nikkei went up by 0.80 percent, while China's Shanghai Composite Index went down by 0.59 percent and Hong Kong's Hang Seng was lower by 0.83 percent.
In Europe, London's FTSE 100 went down by 0.34 percent, France's CAC 40 fell by 1.14 percent, and Germany's DAX Index was lower by 0.46 percent at the closing in the Indian markets.