The 30-share barometer, which ended almost flat in the previous session, closed 199.02 points or 1.23 per cent higher at 16,416.84 after touching the day's high of 16,439.97.
The 50-share National Stock Exchange index Nifty also moved up by 65.25 points, or 1.33 per cent to 4,985.65, inching towards the crucial 5,000 mark. It had touched a high of 4,994.95 during the session.
Brokers said besides a stabilising rupee, which recovered for the third straight day today, a firming trend in the global markets after concerns eased over Greece's possible exit from Eurozone helped Indian markets close with gains.
Covering-up of short positions ahead of Thursday's monthly expiry in the derivatives segment, also helped the trading sentiment, dealers said.
Stock market participants said the market mood was helped by global rating agency Moody's comment that the sliding rupee will not impact India's sovereign ratings. After closing at 55.37 a dollar on Friday, the rupee today opened at 55.20 and was last trading at 55.25.
State Bank of India (SBI) led the Sensex gainers today with 4.76 per cent gain, followed by Bhel (4.17 pc), Tata Power (3.81 pc), Hindalco (2.82 pc) and Tata Motors (2.69 pc).
Index heaveywight Reliance Industries ended higher by 1.33 per cent at Rs 701.20 largely buoyed by its ongoing buy-back issue, while another influential stock, Infosys ended 0.66 per cent at Rs 2,387.65.
Amongst indices, the BSE-Bankex gained the most by adding 2.42 per cent to 11,162.95 points. It was followed by BSE-Power (2.33 pc), BSE-Consumer Durables (2.20 pc) and BSE-Capital goods (1.85 pc).
