Analysts said domestic markets benefited from improved demand for global risk on the back of signs of a US budget compromise intended to resolve the so-called "fiscal cliff." "Market is getting more hopeful that RBI will lower rates in the next policy meet," said Hemant Khanwala, Head of Equities, Kotak Life Insurance.
The benchmark BSE index rose 0.63 percent, or 120.33 points, to end at 19,364.75, marking its biggest single day percentage gain since November 30. The broader NSE index rose 0.66 percent, or 38.90 points, to end at 5,896.80, marking its highest close in a week. Shares in banks such as State Bank of India ended 1.2 percent higher after falling as much as 2.8 percent. ICICI Bank rose 0.4 percent, while Bank of India gained 2.9 percent.
Gains were fuelled by expectations the banking amendment bill will pass parliament after the government dropped a controversial clause that would have allowed banks to trade in commodity futures. India's Bharat Heavy Electricals Ltd gained 4.2 percent after CLSA added the stock to its Asia ex-Japan long only portfolio with a 3 percent weighting.
Tata Consultancy Services rose 0.4 percent after its management reiterated its positive forecast for fiscal years 2013 and 2014 in a meeting with analysts on Monday. Shares in Sun Pharmaceutical Industries, India's most valued drugmaker, gained 2.2 percent after its unit agreed to buy the generic drugs business of US-based URL Pharma from Japan's Takeda Pharmaceutical Co However, among stocks that fell, Jaiprakash Power Ventures Ltd ended 6.8 percent lower after its promoters sold 49.7 million shares, or about 2 percent of its equity, at an average price of 39 rupees a share.