The scrip ended 6.91 percent up at Rs 627.80 on the BSE. During the day, it surged 8 percent to touch Rs 634.80. Ranbaxy stock rose 4.90 percent to Rs 467.
On the NSE, Sun Pharma gained 6.78 percent to settle at Rs 628.
The stock was the best performer among the blue-chips on both the key indices - Sensex and Nifty.
Sun Pharmaceutical Industries announced on Monday that it would acquire troubled rival Ranbaxy Laboratories in a USD 4-billion deal that includes USD 800 million debt. Sun's scrip that day had rallied nearly 3 percent.
Indian stock markets were closed yesterday for a public holiday.
Both the companies have said that the merged entity will be the largest pharmaceutical firm in India, with combined revenue of about USD 4.2 billion. It will be the fifth-largest speciality generics company in the world.
Ranbaxy, controlled by Daiichi Sankyo of Japan, is struggling with quality compliance issues as all four of its plants in India have been banned by the US Food and Drug Administration from exporting products to America.
Sun's Karkhadi plant is also barred from shipping products to the US for violation of good manufacturing norms.
As per their agreement, Ranbaxy shareholders will get 0.8 share of Sun Pharma for each share of Ranbaxy, representing an implied value of Rs 457 for each Ranbaxy share.