The benchmark BSE Sensex jumped over 130 points, tracking gains in Asian equities following an upbeat US jobs report, but caution prevailed a day before the Reserve Bank of India's policy meeting at which it is expected to cut interest rates by at least 25 basis points.
The 30-share BSE index Sensex ended higher by 130.01 points or 0.51 per cent at 25,399.65 and the 50-share NSE index Nifty was up 45.75 points or 0.59 per cent at 7,758.80.
Among BSE sectoral indices, TECK index gained the most by 2.06 per cent, followed by IT 1.95 per cent, auto 1.16 per cent and power 0.81 per cent. On the other hand, realty index was down 0.61 per cent and FMCG 0.38 per cent.
Top five Sensex gainers were M&M (+4.29%), Bharti Airtel (+3.76%), Infosys (+3.21%), Tata Motors (+2.24%) and Asian Paints (+1.8%), while the major losers were ITC (-1.5%), Maruti (-1.13%), Axis Bank (-0.99%), Coal India (-0.83%) and HDFC (-0.67%).
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Asian shares held largely firmer after upbeat US jobs and factory data hinted at stronger corporate earnings without increasing concerns of potential US interest rate hikes.
Sentiment back home also got a lift after a business survey showed India's manufacturing activity expanding for the third straight month in March, driven by stronger demand.
However, the focus remained on the outcome of the RBI's policy review on Tuesday. Most analysts expect the repo rate to be cut by 25 bps although five out of 50 analysts polled by Thomson Reuters predicted a 50 bps cut.
Traders are also expecting measures to increase liquidity in the country's banking system as periodic cash crunches are seen impacting the effectiveness of the monetary policy.
“There could be a tinge of disappointment for the market if RBI cuts rates just by 25 bps and does not do much to boost liquidity,” said Deepak Jasani, head of retail research at HDFC Securities.
“If the statement accompanying the credit policy is not dovish despite a 25 bps rate cut, it could disappoint markets."
European shares fell to near a one-month low on Monday, with telecom shares slumping after talks between Orange and Bouygues on a deal to create a dominant French telecoms operator collapsed.
The STOXX Europe 600 Telecommunications index fell 2 per cent, the top sectoral decliner, following the failure on Friday of the proposed €10 billion ($11.4 billion) cash-and-share deal.
Asian share prices held firm on Monday after solid US payroll data underpinned investor risk sentiment while dovish comments from Federal Reserve Chair Janet Yellen the previous week kept the US dollar in check.
Oil prices showed signs of fatigue after last quarter's rebound, extending their decline on Friday following comments from a powerful Saudi prince that raised doubts about the chance of any output freeze deal later this month.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 per cent while Japan's Nikkei also ticked up 0.2 per cent after initial fall.