The Sensex and the Nifty rose over 0.4 per cent at the closing session on Monday led by banking, power, auto and healthcare sector stocks amid positive global cues.
Domestic sentiment was buoyed by Finance Minister P Chidambaram's Interim Budget proposals for 2014-15.
Auto stocks were up as the excise duty has been reduced for small cars from 12 per cent to 8 per cent and for SUVs from 30 per cent to 24 cent.
Investors were also enthused by Chidambaram saying that the fiscal deficit would be contained at 4.6 per cent of GDP in 2013-4
The 30-share BSE index Sensex was up 97.24 points or 0.48 per cent at 20,464.06 and the 50-share NSE index Nifty was up 24.95 points or 0.41 per cent at 6,073.30.
On the BSE, banking index was up 1.21 per cent, followed by power 0.96 per cent, auto 0.76 per cent and healthcare 0.67 per cent. On the other hand, realty, consumer durables and metal indices fell the most by 0.82 per cent, 0.73 per cent and 0.71 per cent, respectively.
Tata Power, M&M, Dr Reddy's, ICICI Bank and Hero MotoCorp were the top five Sensex gainers, while the top five losers were Coal India, Hindalco, RIL, Wipro and BHEL.
European stocks were up after the Stoxx Europe 600 Index posted the biggest weekly gain this year.
Asian stocks were up, with a regional benchmark index poised to gain for the eighth time in nine days, after China’s new credit increased to a record in January, boosting optimism the world’s second-largest economy can maintain its growth momentum.