Benchmark indices surged past the 25,000 points mark, as a cut in small savings interest rates boosted sentiments across the markets.
The Sensex was trading with gains of 83 points at 25,057 points, while the Nifty was up 22 points in trade.
Banking stocks saw gains as investors lapped up shares on hopes that the cut in small savings rate would lead to cut in deposit rates, which could also led to cut in lending rates and hence a boost to credit demand.
IDBI Bank was up 5 per cent on reports that the government was looking at 2-large majors acquiring a stake in IDBI Bank, which would transform the bank into a private sector bank like Axis Bank.
Most other PSU banking stocks like Oriental Bank and Canara Bank were also trading higher.
Jewellery stocks were higher after the country's jewellers late Saturday decided to end their 18-day strike after they received government assurance that the excise department will not harass them for the collection of a proposed excise duty on non-silver jeweller. TBZ, P C Jewellers were among the gainers.
Meanwhile, most Asian markets were trading lower, following a slight dip in crude prices.