The dollar index, which touched a 7-month low earlier in the week, was up 0.13 percent after the US data Treasury prices fell.
The dollar, which fell to a seven-month low against a basket of currencies on Monday, was up about 1 percent.
Oil majors Exxon and Chevron fell about 6.6 percent. US oil and gas stocks have already lost about $310 billion of market value this year.
The 30-share index, which had gained 1.06 percent in highly volatile trade on Friday, spurted by 222.34 points, or 0.81 percent, to 27,680.98.
The 30-share index was trading higher by 78.52 points, or 0.27 percent, at 28,581.82 as sectoral indices, led by IT, technology and healthcare, were trading in positive zone.
The Nifty was also a life time high as markets cheered the RBI's decision to cut monetary rates, a decision that it sees as a boost for industrial growth.
The 30-share index rose further by 209 points, or 0.71 per cent, to 29,570.50.
Expectations of faster economic reforms by the government and optimism over the forthcoming Budget, buoyed trading sentiments.
In previous ten sessions, the Sensex had recorded a massive rise of over 2,346 points, or more than 8 per cent.
Optimism among funds and retail investors over encouraging Q3 earnings by bluechip companies buoyed trading sentiments, brokers said.
Rising for the seventh straight session, the 30-share index went past 28,000 mark after over three weeks by rising 122.45 points.
All the sectoral indices were trading in positive zone with gains up to 1.35 per cent, extending major support to the Sensex and Nifty.
A massive sell-off in the global markets created panic on Dalal Street this morning with the Sensex tanking over 300 points and the Nifty trading below 6150 in morning trade. <br /><br />
Stock markets will take cues from the next batch of earnings from blue-chips, including HDFC and L&T, this week amid cautious trading ahead of the RBI policy later this month, say experts.<br /><br />
Indian equity markets opened in the red today with the Sensex down 35.11 points at 21230.07, and Nifty down 12.65 points at 6306.25.<br /><br />
The World Bank has projected India's economy will grow over 6 percent in 2014-15 and 7.1 percent by 2016-17 as global demand recovers and domestic investment increases.
The market has opened marginally higher. The Sensex is up 40.25 points at 20769.63, and the Nifty is up 7.10 points at 6181.70.
The S&P BSE Sensex bounced back after falling for four consecutive days. The Sensex is up 72.26 points at 20859.56, and the Nifty is up 18.60 points at 6210.05.