Despite strong global cues and the positive sentiment generated by the economic measures recently announced, the Sensex pared gains on profit booking. With tomorrow being a holiday, traders exited from their some of their positions.

“The fiscal stimulus package is a move in the right direction and it would certainly boost demand. But as a percentage of GDP, the step would not have a massive impact on growth,” said Devendra Nevgi, CEO and CIO, Quantum MF.

The Sensex is up 250 points at 9,216, off the day's high of 9.432 while Nifty has gained 86points to 2,801.

Among the Sensex stocks, Tata Steel and DLF have zoomed over 8 per cent. Wipro, RCom and Bharti Airtel are up over 5 per cent. All the sectoral indices on the BSE are trading in the green. The BSE realty index has surged 5 per cent while the metal index has gained 3 per cent.

The Indian markets recovered the lost ground in afternoon trade on the back of a strong opening in European markets but it again gave up some ground in late trade.

Asian markets rallied on Monday on optimism about possible new Chinese measures to bolster growth and pledges by President-elect Barack Obama that the world's largest economy will spend its way out of a recession.

Hong Kong's Hang Seng index vaulted 1,198 points, or 8.6 per cent, to 15,044, while Japan's Nikkei 225 average jumped 411.54 points, or 5.2 percent, to 8,329.05.

Like their counterparts in the U.S. on Friday, Asian investors brushed off news that American employers cut 533,000 jobs in November — the most in 34 years. Instead, investors took heart from signs the world's largest economies are redoubling efforts to revive economic growth.

Chinese officials are meeting this week to decide new measures to support the $586 billion of stimulus already planned while in Washington a bailout of ailing U.S. automakers appeared to be falling into place.