MUMBAI (Reuters) - The BSE Sensex and Nifty rose more than 1 percent on Monday, heading towards their biggest daily gain in more than a month as investors snapped up beaten down blue-chips after the Lok Sabha approved the 2015/16 Finance Bill on Thursday.
The Sensex was down 10.4 percent from its record high hit in mid-March, trading close to its lower Bollinger band and with a 14-day relative strength index of 32, and low derivative rollovers before the start of trade on Monday.
Strong growth in passenger car sales in April also raised hopes of a revival in Asia's third largest economy.
However, a rise in India VIX, the volatility gauge, coupled with continued sales by foreign portfolio investors amid fresh worries on retrospective taxes indicates it might just be a temporary bounce from technically oversold state, according to analysts.
"May's start would be good and will continue if the tax and land acquisition bills are resolved," said Deven Choksey, managing director at KR Choksey Securities.
Technically, the Nifty needs to close above 8,350-8,370 for the downtrend to reverse, he added.
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Overseas investors have sold Indian shares worth $1.75 bln over the last 12 sessions excluding Daiichi Sankyo's share sale in Sun Pharmaceutical Industries .
The Sensex gained 1.2 percent, while the Nifty rose 1.3 percent, heading towards their biggest daily gains since March 30.
Investment bank CLSA raised India's weightage by 1 percentage point in its Asia Pacific ex-Japan relative-return portfolio.
Gains also tracked higher Asian stocks as weak China factory activity reinforced views that Beijing will roll out fresh support measures soon for the world's second-largest economy.
Blue-chips led Monday's gains, with Housing Development Finance Corp rising 2.7 percent, and ITC Ltd up 2 percent.
Oil and Natural Gas Corp surged 5.3 percent, while software exporter Infosys Ltd was up 1.4 percent.
($1 = 63.2100 rupees)
(Reporting by Abhishek Vishnoi; Editing by Prateek Chatterjee)