The sentiments were also high as the country's general inflation in December has slowed to a three-year low, giving hope to the industry for a possible rate cut by the central bank, even as industrial output contracted by 0.1 percent in November.
Major indices like information technology (IT), bank and consumer durables made considerable gains.
The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 19,689.09 points, was at 19,818.64 points around 1.30 p.m. -- up 155 points or 0.79 percent from its previous close at 19,663.64 points.
The BSE Sensex touched an intra-day high of 19,864.86 points and a low of 19,689.09 points.
The BSE midcap index was up 52.28 points, while the smallcap index was higher by 36.91 points.
The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) was also trading flat -- up 46.25 points or 0.78 percent at 5,997.55.
Finance Minister P. Chidambaram Monday said that the government would only implement the General Anti-Avoidance Rules (GAAR) from April, 2016, rather than earlier scheduled April, 2014.
Meanwhile, latest data on the country's general inflation trend showed a fall stood at 7.18 percent in December, as compared to 7.24 percent in the previous month, owing to softening in power and fuel prices, government data showed Monday.
The inflation rate for the last month moderated to its lowest levels since December 2009. The rate in increase in prices was recorded at 7.74 percent in the corresponding month of the previous year.
Moderation in inflation would give some relief to the policymakers who have been struggling to balance the need for controlling inflationary pressure and stimulate the economic growth.
Inflation has remained at an elevated level despite a tight monetary policy adopted by the Reserve Bank of India.
There will be pressure on the RBI for rate cuts in its quarterly review of monetary policy for 2012-13 on Jan 29, 2012.
The RBI has kept key lending and borrowing rates unchanged, saying inflation remained sticky and might rise further.
In the Sensex sectoral indices, IT index was up 146.14 points, followed by bank index, which was higher by 120.78 points and consumer durables index which gained by 103.49 points.
In terms of losers, auto index was down by 81.04 points, while the healthcare index was down 11.45 points.
Among other Asian markets, Japan's Nikkei was up 1.40 points, Hong Kong's Hang Seng was lower by 0.45 percent and China's Shanghai Composite Index was down 1.91 percent.
