Sensex gained 327.89 points or 0.4 per cent to open at 81,327.29, while Nifty rose 90 points or 0.36 per cent to 25,076.40.

Sector-wise, the Nifty Financial Services 25/50 index led the gains, rising 0.57 per cent in early trade, followed by Nifty PSU Bank which advanced 0.47 per cent.

Nifty Private Bank gained 0.37 per cent, while Nifty Healthcare Index rose 0.35 per cent. Nifty Metal and Nifty Pharma were up 0.33 per cent and 0.24 per cent, respectively.

On the downside, Nifty IT declined 0.47 per cent, while Nifty MidSmall IT & Telecom fell 0.39 per cent.

Market experts said the strong rally last week had significantly improved investor sentiment, supported by a rare convergence of favourable factors, including aggressive FII buying, attractive valuations, easing crude oil prices, declining US bond yields and improving corporate earnings as reflected in the second-quarter results.

“Concerns over a slowdown in artificial intelligence (AI) spending and a sharp correction in AI-related stocks also contributed to the shift in global market dynamics,” they said.

The experts said FII buying in India is likely to sustain, potentially paving the way for further gains in large-cap stocks.

They added that foreign investor allocations tend to track index weights during major market shifts.

Apart from that, the domestic market sentiment remained upbeat following a strong rally last week, with the Nifty surging 8.6 per cent amid sustained foreign institutional investor (FII) buying and improving global cues.

Globally, US equities ended higher in the previous session, with the Nasdaq gaining 1.09 per cent and the S&P 500 advancing 0.31 per cent.

US equity futures and Asian markets edged higher on Monday, stabilising after a volatile week during which concerns over chip demand triggered sharp losses across technology-heavy Asian markets.

In addition, crude oil prices opened lower on Monday after US President Donald Trump indicated that further strikes on Iran were unlikely as peace talks progressed.