The 30-share barometer rose by 141.43 points, or 0.67 per cent, to close at 21,205.05 points. The index, which lost 226 points in the last two sessions, touched a low of 21,001.13 points in day trade.
Brokers said sentiment improved as the third-largest software provider Wipro posted attractive earnings for the third quarter ending December 2013.
The IT sector index advanced the most rising by 2.83 per cent to 9,661.46. Tata Consultancy Services (TCS) rose by 5.53 per cent, Wipro by 3.77 per cent and Infosys by 0.59 per cent.
The broad-based NSE Nifty rose by 52.30 points, or 0.68 per cent to 6,303.95. It touched the day's low of 6,243.35.
Weak overseas trends and a fall in index major Reliance Industries (RIL), however capped the gains. RIL fell by 1.70 per cent to Rs 869.50.
Among 30-Sensex stocks, 16 closed with gains. Bharat Heavy Electricals Ltd (BHEL), Axis Bank, HDFC Bank, Hero MotoCorp, ICICI Bank, ITC Ltd, Mahindra & Mahindra Ltd and State Bank of India (SBI) were among major gainers.
The Teck index was the second best performer and rose by 2.50 per cent to 5,275.54, followed by FMCG index which settled up by 1.08 per cent to 6,619.06.
* BSE index gains 0.67 pct; NSE up 0.68 pct
* IT shares such as TCS, Wipro lead gains
* Banking shares up; Reliance Industries down on earnings
Indian shares snap 2-day losing streak, tech stocks gain
(Reuters) Indian shares rose on Monday after two days of losses as software services exporters gained after Wipro posted solid earnings and joined domestic rivals in giving a positive outlook for the sector.
Value-buying also boosted recent underperformers, including lenders such as State Bank of India and more defensive stocks such as cigarette maker ITC Ltd.
However, broader gains were capped as Reliance Industries Ltd fell after its October-December quarterly profit when adjusted for other income was seen lagging expectations.
Investors are also growing hopeful the Reserve Bank of India will keep interest rates on hold at its policy review on Jan. 28, which analysts say could spur additional gains in shares.
"For the markets to sustain, we require a lot of good news from the RBI. The policy review is going to be the biggest trigger for the market in the short term," said Mehraboon Irani, head of private client group at Nirmal Bang Securities.
"All economy-related stocks will continue to disappoint, while defensive sectors like pharma and IT will continue to outperform the broader markets."
The benchmark BSE index closed up 0.67 percent at 21,205.05, while the broader NSE index ended higher 0.68 percent at 6,303.95.
Foreign institutional investors bought shares worth 753 million rupees ($12.25 million) on Friday, exchange data showed. FIIs have been buyers for seven consecutive sessions to the tune of 20.21 billion rupees.
Shares in Wipro gained 3.7 percent after the company said late on Friday it is eyeing more lucrative financial industry contracts from Europe and the United States to catch up with its bigger rivals and looks to grow its sales by up to 4 percent this quarter.
Tata Consultancy Services rose 5.7 percent on value-buying after falling 5.8 percent on Friday, the most in a day since October 2011 after its December quarter profit when adjusted for other income, as well as operating margin were seen lagging expectations, said traders.
Banking shares closed higher with State Bank of India gaining 1.3 percent ahead of the RBI policy review as investors expect the central bank to keep rates unchanged.
ITC also gained 1.7 percent at 330.20 rupees after falling 0.2 percent on Friday on value-buying, said traders.
Shares in Aurobindo Pharma closed up 6.7 percent at 409.25 rupees after the company said on Saturday that it agreed to buy Actavis Plc's commercial operations in seven Western European countries for about 30 million euros. .
Reliance MediaWorks' shares rose 18.7 percent to 55.15 rupees after the company said its board approved proposed plans of delisting the company..
However, Reliance Industries fell 1.7 percent after the company's October-December quarter profit, out on Friday, when adjusted for other income, was seen lagging expectations, said dealers.
For additional stocks on the move double click
FACTORS TO WATCH
* Euro edges off two-month low vs dollar, ECB talk weighs
* Oil falls towards $106 on China oil data, Iran deal
* China cheer muted as Deutsche Bank sets European nerves jangling
* Foreign institutional investor flows