The index gains were led by healthy buying in manufacturing, real estate and automobile sectors.
The Sensex gained over 125 points to 37,270.82 from its previous close of 37,145.45. It opened at 37,251.03. The Nifty jumped by 32.65 points to 11,035.70.
Real estate companies on the exchanges were back in favour amid expectations of big-ticket reform announcements for the sector by Finance Minister Nirmala Sitharaman later in the week.
The Nifty Realty index jumped over 4 per cent after Minister of State (MoS), Finance and Corporate Affairs, Anurag Thakur said that the government may make announcement for the realty sector in the coming days.
Consequently, the index finished highest among the 11 sectoral indices on the Nifty, with Oberoi Realty Limited leading the pack with over 10 per cent gain. Godrej Properties Limited, Sunteck Realty Limited and DLF Limited gained in the range of 3 to 6 per cent.
Yes Bank closed over 13 per cent higher following reports that promoters may sell part of their holdings in the lender to One97 Communications Ltd, the parent of Paytm.
Tata Motors jumped over 10 per cent after sales data showed recovery in the Chinese market.