The BSE Sensex jumped over 150 points on Monday, while the broader Nifty advanced around 50 points amid firm Asian trade. The rupee, however, slipped to 59.27 per dollar in early trade.
Gains were led by Larsen & Toubro (L&T), which surged nearly 7 per cent on the back of strong quarterly results announced on Friday. L&T's Q4 profit beat analyst forecasts with a rise of 69 per cent, helped by a steep gain in revenue from its infrastructure and heavy engineering businesses, and gain from a divestment.
L&T's surge drove the capital goods index, which traded with more than 3 per cent gains, and outperformed all other sectoral indices on the BSE.
Power stocks advanced over 1 per cent. State-run Power Grid traded 3 per cent higher.
Infosys shares gained over 1.5 per cent on reports that the IT major has zeroed in on an outsider as the CEO. The company has dismissed the report as speculative.
Only 17 stocks traded lower on the Nifty. FMCG maker HUL was the top Nifty loser, down 2 per cent followed by Sesa Sterlite, which declined 1.5 per cent.
Suzlon Energy shares surged over 8 per cent after reporting a narrowing of loss in the fourth quarter. Idea Cellular jumped 2 per cent after the company announced a hike in rentals.
Analysts remain optimistic about markets despite recent correction. The immediate trigger will be the Reserve Bank's monetary policy announcement tomorrow, analysts say, but in the medium term, investors are eying the first budget of the Narendra Modi-led government.
"Market has given a correction and it's a healthy correction. This seems to be a buy-on-dips market. At every level, we have seen individual stocks outperforming," said Deven Choksey, managing director, KR Choksey Securities.
"We have RBI policy next week, and I don't think rates will be changed. We have more policy measures from the government to watch in the coming weeks, which will have an impact on markets."
As of 09.30 a.m., the Sensex traded 101 points higher at 24,319, while the Nifty traded 30 points higher at 7,260.
(With inputs from Reuters)