Indian share prices surged 2.69 percent Monday in low volume trade as domestic and overseas funds bought leading benchmark index shares, dealers said.
The Mumbai stock exchange's 30-share Sensex closed up 206.68 points at 7,892.32. Turnover was low at 21.10 billion rupees (467 million dollars) as 1,468 stocks gained, while 883 declined.
"Funds were keen buyers in some of the index stocks given the low valuations after this month's losses," said Vijay Tilakraj, chief dealer with domestic brokerage Prabhudas Liladhar.
India's Sensex has fallen steadily since it surged to record high of 8,821.94 on October 5, led by overseas fund investments of more than eight billion dollars since the start of the year.
He said retail investors were out of the market ahead of the Diwali festival Tuesday. All government and state-owned offices including the Reserve Bank of India will however be closed to celebrate Diwali, the festival of lights.
Indian stock markets will open for a special 75-minute late evening session Tuesday to honour the Hindu goddess of wealth.