At 10:22 am, the Sensex traded 271.13 points - or 0.73 per cent - higher at 37,621.46, while the Nifty was up 75.05 points - or 0.68 per cent - at 11,122.85.

Market breadth favoured gains, with 1,127 stocks on the BSE trading higher against 602 struggling with losses. On the NSE, 1,047 stocks advanced while 606 declined.

Top percentage gainers on the 50-scrip index were Sun Pharma, Bharti Infratel, Dr Reddy's, NTPC, Indiabulls Housing Finance and ICICI Bank, trading between 1.60 per cent and 3.87 per cent higher.

ICICI Bank, Reliance Industries, Infosys, Larsen & Toubro and HDFC contributed the most to the advances in Sensex.

Sun Pharma shares rose as much as 3.76 per cent to Rs 430.35 apiece on the BSE, after the drug maker signed an agreement with the China Medical System Holdings for the sale of generic products in Mainland China. The stock was the top percentage gainer on both benchmark indexes.

Analysts say that hopes of market-friendly measures by the government may drive some gains in the near term.

“In absence of any major event, participants are keenly awaiting some action from the government, after the recent meetings of the FM with industry leaders and capital market representatives. There is a strong buzz that they could announce some stimulus package and tweaking in the tax surcharge on the FPIs as early as next week, to revive the economic growth and boost the market sentiments,” said Ajit Mishra, vice president, research, Religare Broking.

Equities in other Asian markets rose on Monday as hopes of more stimulus from central banks around the world and steps being taken by major economies such as Germany and China soothed investors' fears of a sharp global economic slump.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.25 per cent. Australian stocks added 0.7 per cent, South Korea's KOSPI advanced 0.5 per cent and Japan's Nikkei rose 0.7 per cent. Over recent weeks, recession anxiety has led to a shakeout in global financial markets.