Easing crude prices on receding geo-political worries and positive European markets on reports that Portuguese central bank is set to financially rescue a crisis-hit lender, also helped markets snap a two-session losing trend.
Sensex resumed strong in line with firm Asian cues and traded mostly in positive before settling at 25,723.16, a rise of 242.32 points or 0.95% its biggest gain since July 22 (310.63 points). Sensex had lost 606.38 points, or 2.33% in the previous two trading days August 1 and July 31.
Similarly, the 50-scrip NSE Nifty bounced back by 81.05 points, or 1.07%, to end at 7,683.65. It had shed about 189 points in previous two days. Mondays 81.05-point gain is also Nifty's best since July 22 (83.65 points).
Expectations that Reserve Bank of India (RBI) in its monetary policy review on Tuesday will give some relief supported the bullish market sentiment, brokers said. However, consensus is of the view that RBI will not cut rates.
Interest-sensitive stocks such as SBI, ICICI Bank and Axis Bank gained 1% ahead of RBI policy outcome. Consumer durables, realty, capital goods and auto shares were in good demand. IT shares were in the limelight after steep fall in the rupee value last week. Infosys was the top gainer from the Sensex pack on Monday with a rise of 3.66%. Wipro rose 2.42% and TCS 0.42%.
"IT, banking and auto stocks drove benchmark indices higher ahead of RBI monetary policy. Portugal agreed to spend 4.9 billion euros to rescue Banco Espirito Santo, its largest listed bank. This provided some support to European markets, said Dipen Shah, head of Private Client Group Research, Kotak Securities.