Shares climbed about 1.5 per cent on Monday on hope that the Reserve Bank of India (RBI) could cut interest rates after a weather forecast of good and timely rain. This is the second day of gain in the market, including Friday, when its had risen about 0.4 per cent.
Shares rose on strong buying during the last hour of trading on Monday.The BSE exchange's benchmark Sensex rose by 363 points or 1.3 per cent, to end the day at 27,687. The National Stock Exchange's Nifty gained 111 points or 1.4 per cent, to close at 8,373.
Observers said the markets had started factoring in a rate cut by the central bank on or before its June 2 policy review meet.
"There is a lot of liquidity adjustment on, as other economies in the region are not doing so well. That leads to more flows and, subsequently, more volatility as the liquidity adjustment continues," said Pankaj Pandey, head of research, ICICI Direct.
Health care stock Dr Reddy's led gains in the BSE Sensex, rising about 3.5 per cent on the successful launch of a new drug. Drug maker Lupin, though not part of the index, rose about three per cent on its inclusion in the MSCI index.
On the BSE, the health care index was up 1.5 per cent. Among sectors, stocks of consumer durables and the oil & gas sectors rose about two per cent. Beaten-down sectors like capital goods and fast moving consumer goods were up about 1.3 per cent. Rate-sensitive stocks of the banking sector were up 1.2 per cent and automobile stocks by 0.7 per cent, on hope of lower interest rates.