The 30-share BSE Sensex jumped 3,656.74 points to 85,323.20 in opening trade. The 50-share NSE Nifty surged 1,219.65 points to 26,308.05.

Later, both the benchmark indices further extended their winning momentum. The BSE benchmark zoomed 4,205.27 points or 5.14 per cent to 85,871.73. The Nifty jumped 1,252.8 points or 4.99 per cent to 26,341.20.

India and the US have agreed to a trade deal under which Washington will bring down the reciprocal tariff on Indian goods to 18 per cent from current 25 per cent, US President Donald Trump said on Monday after a phone conversation with Prime Minister Narendra Modi.

From the Sensex firms, Adani Ports, Bajaj Finance, Eternal, Bajaj Finserv, InterGlobe Aviation and Reliance Industries were trading sharply higher in the range of 7.2-3.7 per cent.

ITC emerged as the only laggard from the blue-chip pack.

"The dramatic announcement of the long-awaited US-India trade deal and the US decision to cut tariffs on India from 50 per cent to 18 per cent is a game changer for the Indian economy and stock markets.

"The combination of the US-India trade deal, the EU-India trade deal and the growth-oriented Budget will boost the market sentiments and the animal spirits in the economy. The stock market, anticipating and discounting these developments will boom," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

In Asian markets, South Korea's Kospi rebounded and jumped 5 per cent. Japan's Nikkei 225 index, Shanghai's SSE Composite index and Hong Kong's Hang Seng index were also trading higher.