The NSE index rose to a 15-1/2 month high on Monday, tracking gains in other Asian markets, after solid US jobs data bolstered expectations of an acceleration in US economic growth at a time of ultra-easy global monetary policy conditions.
The broader NSE index ended up by 28.2 points or 0.32 per cent at 8,711.35, after hitting a high of 8,723.50, its highest since April 16, 2015, earlier in the session.
The benchmark BSE index ended higher by 104.22 points or 0.37 per cent at 28,182.57.
Both the indexes posted their third straight session of gains.
All BSE sectoral indices ended higher. Among them, oil & gas index gained the most by 1.54 per cent, power 0.92 per cent, realty 0.88 per cent and consumer durables 0.75 per cent.
Gainers, losers
Top five Sensex gainers were Adani Ports (+2.8%), HDFC (+1.7%), Reliance (+1.49%), Dr Reddy's (+1.11%) and Lupin (+1.09%), while the major losers were Bharti Airtel (-3.11%), Sun Pharma (-1.12%), NTPC (-0.9%), ITC (-0.58%) and Tata Motors (-0.46%)
Among the gainers, miners Hindalco Industries Ltd and Vedanta Ltd rose 3.7 per cent and 0.27 per cent respectively, tracking gains in London copper prices after solid US jobs reports boosted the appetite for metals.
Oil refiner Hindustan Petroleum Corp rose 4.54 per cent after the central bank had on Friday raised the limit for foreign shareholding in the company to up to 40 percent from 24 percent.
Housing Development Finance Corp rose 1.7 per cent ahead of the Max Financial board meeting to discuss the terms of planned merger with HDFC Life.
But Union Bank of India fell 6.5 per cent after the state-run lender's first-quarter profit plunged 68 per cent on higher bad loans.
Fed rate hike
Although the strong July US payrolls data raised hopes for the world's biggest economy may have conclusively turned a corner after some volatile readings this year, investors expect the Federal Reserve will only raise rates in 2017 given that other countries are still cutting rates.
Sentiment back home also remained supported by the passage of the long-awaited Goods and Services Tax (GST) Bill in the Upper House of Parliament last week, which paves the way for the rollout of the country's single biggest tax reform since independence.
Still, analysts said further gains could be constrained on valuations. The broader NSE index is valued at 20.71 times its estimated 12-month earnings, versus a multiple of 13.46 for the Thomson Reuters Emerging Markets Asia Pacific Index.
RBI policy review
Investors are also likely to take a pause ahead of the Reserve Bank of India's policy review on Tuesday where it is expected to leave rates unchanged.
“Today's gains are mainly due to positive US jobs report which has improved sentiment globally. Going ahead, we expect some consolidation or even correction as valuations have peaked-up,” said Ambareesh Baliga, a Mumbai-based independent market analyst.
A report by IFA Global said: "Asian stock markets are trading positive, with Hang Seng index trading higher by 296 points and Nikkei index is trading higher by 323 points following positive momentum in global equities. US stock markets closed on a positive note. The Dow Jones Industrial Average closed higher by 191 points and Nasdaq index closed higher by 54 points. US equities rose after US non-farm payrolls data showed the economy added 250,000 jobs in July compared to estimate of 180,000 jobs. European stock markets closed in the green, with FTSE closing higher by 53 points and CAC closing higher by 64 points. European indices closed higher as positive momentum continued after the BoE expanded its stimulus program.''