The Bombay Stock Exchange's 30-share index Sensex rose 179.75 points or 0.9% and ended at 20,103.53 while the National Stock Exchange's 50-share Nifty gained 55.30 points or 0.92% to close at 6,074.65. Sensex posted its biggest percentage gain since January 14.
The Reserve Bank of India will unveil its mid-quarter policy review on January 29 amid expectations the central bank will cut interest rates to boost growth into the Asia's third-biggest economy.
Most economists expect the RBI to cut its policy repo rate by 25 basis points on Tuesday to 7.75 per cent.
The RBI last cut rates in April 2012 by 50 basis points but warned at the time there would be limited scope for further cuts on back of inflationary concerns.
In the results calendar, Tata Coffee will declare its third quarter performances later today while Adani Ports, Adani Power, JSW Steel and Reliance Infrastructure are scheduled on Monday.
Globally, Asian shares ended down on concern over corporate profitability while Japanese shares rose on optimism about the earnings prospects for Japanese exporters with the yen weakening.
Hong Kong's Hang Seng fell 0.08% to 23,580, Taiwan's Weighted index declined 0.3% to 7,672, Singapore's Straits Times inched up 0.44% to 3,262 while China's Shanghai Composite dropped 0.5% to 2,291 and Japan's Nikkei rose 2.88% to 10,926.
European markets traded mixed, France's CAC rose 0.08% to 3,755, Germany's DAX gained 0.06% to 7,753 while UK's FTSE was down 0.18% to 6,253.
Back home, all sectoral indices gained with metals, capital goods, autos, banks, real-estate,
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