The Sensex and Nifty ended higher by nearly 1 per cent as consumer goods makers such as ITC Ltd surged on hopes the newly implemented goods and services tax (GST) would reduce retail prices and boost sales.
The government had on Saturday rolled out its biggest tax reform in the 70 years since independence from British colonial rule, replacing more than a dozen federal and state levies with the GST.
The unveiling of GST led some of India's biggest automakers and retailers to announce price cuts, although many companies shied away from doing so due to the complexity of the new system.
Earlier in the day, both indexes posted their biggest intraday percentage gains since May 25.
All BSE sectoral indices ended in the positive zone. Among them, FMCG index was the star-performer and was up 3.4 per cent, followed by metal 1.85 per cent, realty 1.48 per cent and auto 1.33 per cent.
Top five Sensex gainers were ITC (+5.7%), Hero MotoCorp (+2.17%), Maruti (+1.96%), Coal India (1.95%) and Infosys (+1.68%), while the major losers were NTPC (-1.17%), Kotak Bank (-0.72%), Cipla (-0.6%), Sun Pharma (-0.54%) and Lupin (-0.5%).
ITC shares surged as much as 9.6 per cent to hit a record high of Rs 354.80.
“FMCG companies like ITC are going to benefit in the long run from the GST rollout,” said Anupam Singhi, chief operating officer at independent research firm William O'Neil India.
FMCG index hits all-time high
NSE's Nifty FMCG index climbed as much as 5.6 per cent to an all-time high with Hindustan Unilever Ltd gaining above 1 per cent.
Cigarette maker ITC was among the top gainers, rising as much as 9.62 per cent to a record high of 354.80. It drove the Nifty index higher, contributing nearly 45 net points to the index.
Carmaker Maruti Suzuki India gained as much as 1.8 per cent after posting a 7.6 per cent jump in June vehicle sales on Saturday, while commercial vehicles maker Ashok Leyland climbed to its highest in a year after reporting an 11 per cent rise in June total sales.
Shares of fertiliser makers surged after GST rate for fertilisers was slashed to 5 per cent on Friday. Chambal Fertilisers and Chemicals Ltd was up as much as 4 per cent, while Nagarjuna Fertilizer & Chemicals and Madras Fertilizers gained more than 3 per cent.
Asian markets
Asian stocks held two-years highs on Monday, starting the new month on a solid footing after two quarters of gains, while expectations of credit tightening by the world's major central banks kept global bond markets under pressure.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, staying within a stone's throw of its two-year peak hit last week. Japan's Nikkei ticked up 0.2 per cent, while US stock futures gained 0.2 per cent.