State-owned refiners, which benefit from cheaper oil, advanced and the BSE Oil & Gas sectoral index rose 1.73 per cent. Capital goods, bank and realty stocks led 12 of the 13 sectoral indices higher.
BHEL and ICICI Bank were the biggest of the 27 gainers on the 30-share Sensex, which snapped three days of losses and helped investors gain Rs 1 lakh crore.
The S&P BSE Sensex, opened on a strong note and stayed firm through the day. It shot up 387.69 points, or 1.92 per cent to end at 20,605.08 -- close to the day's highs.
Lower crude prices would help ease inflation in India, which imports about 80 per cent of its crude oil requirements.
"It would cut down on its growing current account deficit by reducing the import costs on crude oil," said Raghu Kumar, Co-founder of RKSV. "Although the deal is an interim deal, it shows promise that crude oil prices might remain low for the foreseeable future, a positive sign for the Indian economy."
State-owned oil refiners Hindustan Petroleum surged 6 per cent, Bharat Petroleum added 4.45 per cent and Indian Oil advanced 2.52 per cent. State-run explorer ONGC rose 3.7 per cent on prospects that lower oil prices would ease its fuel subsidy burden.
The markets may remain volatile over the next few days on alternate bouts of buying and selling due to the expiry of derivative contracts on November 28.