The BSE Sensex shot up by 293 points in opening trade on Monday, mainly on the back of a flurry of buying by funds and investors.
Brokers said sentiments turned buoyant after market regulator Securities and Exchange Board of India (Sebi) allowed foreign institutional investors (FIIs) to invest in government securities without any auction mechanism so as to boost foreign fund inflows into the capital markets.
They said rise in rupee also supported the upside in equities. The Indian currency gained 90 paise against dollar to 62.58 in early trade on Monday.
Amid a firming trend in the Asian region, the 30-share Sensex gained 293.30 points, or 1.49 per cent, to trade at 20,026.06, with banking, capital goods, PSUs and power sector stocks leading the rally.
The BSE benchmark had lost over 265 points in the previous two sessions.
The 50-share Nifty rose 81.95 points, or 1.40 per cent, to trade at 5,932.55.
In the Asian region, Hong Kong's Hang Seng index rose by 1.47 per cent in the opening trade, while Japan's Nikkei would remain closed on Monday.
The US Dow Jones Industrial Average ended 0.49 per cent higher on Friday.