After soaring 600 points during the session, the 30-share index settled 429.25 points, or 1.21 per cent, higher at 35,843.70.
The NSE Nifty surged 121.65 points, or 1.17 per cent, to close at 10,551.70.
M&M was the top gainer in the Sensex pack, jumping around 6 per cent, followed by Titan, HCL Tech, Tata Steel, Infosys and TCS.
On the other hand, Axis Bank, HUL, Kotak Bank and Bharti Airtel were among the laggards.
According to Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi, market rallied tracking positive Asian peers on news that Germany's BioNTech and US pharmaceutical giant Pfizer reported positive preliminary results from a joint project for a potential coronavirus vaccine.
Further, positive factory output data across economies too boosted global investors' risk appetite, traders said.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul ended with significant gains.
Stock exchanges in Europe were also trading around 1 per cent higher in early deals.
International oil benchmark Brent crude futures rose 0.86 per cent to USD 42.39 per barrel.
On the currency front, the rupee appreciated 56 paise to settle at 75.04 against the US dollar. ANS ABM ABM