The Sensex closed up 1.86% or 315.58 points at 17,254.86 points. Only three of its components closed in the red.
The stock markets will open for a 90 minute special trading session on Wednesday. The markets will be closed on Thursday on account of Diwali.
EU policymakers appear to be inching towards a deal on bank recapitalisation and rules for using the European Financial Stability Facility, driving gains for Indias IT stocks for a second consecutive day. The countrys flagship IT sector has been looking to increase its sales in Europe, its second-largest export market, to hedge against US exposure.
Infosys, the countrys second-largest software services firm, and a bellwether of the countrys $76-billion IT industry, closed up 3.3% at R2,858.70, having risen as much as 4.8%. Tata Consultancy Services, the market leader, closed up 1.8% at R1,098.65, with rival Wipro ending the day at R372.15, a gain of 3.9%.
Automakers, who have been hit with a slowdown in demand over the past quarter caused by the high cost of borrowing, saw their shares rise after the central bank said ithe likelihood of a rate move in December is low.