The 30-share barometer BSE Sensex gained 70.89 points, or 0.29 per cent, to 24,755.74 with stocks of consumer durables, metals, IT, realty, oil and gas and power sectors leading the rise.
The Sensex had gained 467.51 points in the previous session on the back of slight improvement in HSBC Indian Manufacturing Purchasing Manager's Index (PMI), a measure of factory production in May.
The wide-based NSE Nifty moved up by 15.75 points, or 0.21 per cent, to 7,378.25.
Brokers said increased buying by participants before the Reserve Bank of India's bi-monthly monetary policy review today boosted the sentiments.
Besides, a firming trend on the other Asian markets also supported the upside, they said.
Steel stocks gain after positive manufacturing data in a private survey in China, the world's biggest consumer and producer of the metal.
Tata Steel gains 2.4 percent, Steel Authority of India is up 2 percent, while JSW Steel rises 0.8 percent.
Cement stocks also gain on value buying. ACC rises 1.6 percent while Ambuja Cement is up 2.2 percent.
Markets await the Reserve Bank of India's policy review, with most analysts expecting the central bank to keep interest rates on hold but to ease up a bit on its tough inflation rhetoric in a conciliatory gesture to the new Narendra Modi government.
FIIs bought Indian shares worth 2.34 billion rupees ($39.60 million) on Monday, provisional exchange data show.
In the Asian region, Hong Kong's Hang Seng index gained 0.90 per cent and Japan's Nikkei was up by 1.03 points in early trade today. The US Dow Jones Industrial Average ended 0.16 per cent higher in the previous session.