Besides, the market was propelled by capital inflows, strong cues from European markets and short-coverings ahead of the settlement of June derivative contracts this week.
Meanwhile, auto and banking sectors bolstered the market, up for the third session straight.
Stocks of state-owned oil companies jumped after the government hiked prices of diesel, cooking gas and kerosene last Friday -- a move that would reduce subsidy burden on them and boost their earnings.
As a result, HPCL spurted by 5.80 per cent, Oil India by 5.69 per cent, BPCL by 4.62 per cent, ONGC by 4.16 per cent, IOC by 3.10 per cent and GAIL by 1.83 per cent.
Besides, there was good support by other heavyweights such as L&T, ICICI, HDFC Bank, SBI, M&M, HDFC, TCS, Tata Steel, Bharti Airtel, Tata Motors and Maruti Suzuki.
The Bombay Stock Exchange's 30-stock bellwether index resumed lower, tracking weak Asian trends, but recovered.
It bounced back to a high of 18,494.11 before ending at 18,412.41 -- up 171.73 points or 0.94 per cent, a total gain of 861.78 points or 4.91 per cent in three trading sessions.
The NSE 50-issue Nifty also shot up 55.35 points or 1.01 per cent to end at 2-week high of 5,526.60.
"Oil, banking and auto stocks witnessed smart rally. The Government hiked oil price and cut excise duty, while Brent crude declined to 4-month low -- all this boosted the market sentiment," said Parag Doctor, Associate VP at Motilal Oswal Securities.
