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Markets edged higher with capital goods major L&T leading the gains after a private survey last week showed that India's manufacturing activity rose to a 2-year high.
At 9:40AM, the 30-share Sensex was up 98 points at 27,986 and the 50-share Nifty was up 25 points at 8,420.
Benchmark indices are expected to consolidate gains this week and investors would take cues from earnings with Infosys kicking off the December-quarter result season on Friday.
Data for UK construction purchasing manager's index (PMI) for December will be unveiled on Monday, followed by the ISM Services PMI data for the US on Tuesday. US nonfarm payrolls and unemployment rate data are also scheduled for release later in the week.
On the global front, the euro hit a nearly nine-year low versus the dollar on Monday as investors bet on quantitative easing by the European Central Bank while Asian shares were subdued as soft manufacturing surveys soured the mood.
The euro fell to as low as $1.18605, its weakest level since March 2006, having fallen below an important support at $1.20. The common currency last traded at $1.1944, down 0.5 percent from late U.S. trade on Friday.
US stocks closed little changed on Friday in the first trading session of 2015, finishing well off session highs as economic data short-circuited early gains.
In a sign of tepid economic conditions, construction spending unexpectedly fell 0.3% in November, while the pace of growth in the US manufacturing sector slipped to a six-month low in December, according to the Institute for Supply Management.
The Dow Jones industrial average rose 9.92 points, or 0.06%, to 17,832.99, the S&P 500 lost 0.7 points, or 0.03%, to 2,058.2 and the Nasdaq Composite dropped 9.24 points, or 0.2%, to 4,726.81.
All the sectoral indices were in the green with BSE Capital Goods index emerging as the top gainer up 1.4% followed by Consumer Durables, Auto and Metal indices among others.
The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, rose to 54.5 in December from 53.3, its highest since end-2012 and its 14th straight month above the 50-mark that separates growth from contraction.
Infosys was up 0.7% ahead of its third quarter earnings on Friday. TCS was up 0.4% and Wipro gained 0.7%.
Maruti Suzuki was up 1.8% after the company reported 21% grwoth in sales during December 2014 compared to the same month last year.
Other Sensex gainers include ITC, Axis Bank, ICICI Bank, Sesa Sterlite and Tata Steel among others.
HDFC Bank, HDFC, SBI and Coal India were marginally down in early trades.
Among other shares, VA Tech Wabag has gained 4% to Rs 1,561 on BSE in early morning trade after the company announced that it has bagged Rs 220-crore order for design and construction of 140 million litres a day sewage treatment plant at Dinapur in Varanasi.
In the broader market, the BSE Mid-cap and Small-cap indices were up over 0.5% each.
Market breadth was positive with 1,154 gainers and 459 losers on the BSE.
