The broader NSE index rose 0.59% to 11,113.20 by 0445 GMT, while the benchmark BSE index was up 0.64% at 37,588.90.
Wall Street stocks rose on Friday after Der Spiegel magazine reported that Germany's government was willing to take on debt, raising hopes that Europe's largest economy could avoid a recession and cooling worries about a global economic slowdown.
Asian stocks tracked the Wall Street rally on Monday, while a move by China's central bank to change the way a key interest rate benchmark is set also helped sentiment.
Sun Pharmaceutical Industries Ltd rose 4% and led gains on the NSE index, after the company signed a long-term licensing deal to develop generic products in China.
Shares of its peers Dr Reddy's Laboratories and Cipla Ltd were among the top gainers on the NSE index, pushing the Nifty pharma index up by 1.94%.
"There is some buying in the pharmaceutical basket because of a lack of opportunity in the overall arena," said Saurabh Jain, assistant vice-president of research at SMC Global Securities in New Delhi. "Markets are looking for a solace."
Indian markets have had a rocky journey in recent months, with the NSE index falling about 8% since a record high in June, amid slowing economic growth, a massive slowdown in the automobile industry and poorly received budget proposals.
India's Finance Minister Nirmala Sitharaman this month held several meetings with industry executives, who have called for stimulus measures, including tax rebates, to support consumer demand and private investment.
A source told Reuters on Friday that the government was looking into proposals such as exempting foreign portfolio investor trusts from recently imposed high taxes, deferring a plan to raise the minimum public shareholding in listed companies and easing of banking credit.
"In absence of any major event, (market) participants are keenly awaiting some action from the government after the recent meetings of the finance minister," said Ajit Mishra, vice president, research at Religare Broking Ltd in New Delhi.