Markets surged in late trades, snapping their five-day losing streak, led by rate sensitive shares on hopes that easing inflation may give central bank the much needed comfort to cut key policy rates.
The 30-share Sensex ended up 222 points at 25,229 and the 50-share Nifty ended up 73 points at 7,527.
As per the data released late Monday, consumer price index (CPI)-based inflation fell to 7.31% in June, the lowest since its launch in January 2012.
Its wholesale counterpart declined to a four-month low of 5.43% in the month and wholesale price inflation eased to a four-month low in June after the new government curbed farm exports.
The Indian rupee trimmed early losses and was trading marginally lower at Rs 60.12 against the US dollar compared to the previous close of Rs 60.07 as gains in domestic equities aided sentiment.
Asian markets ended firm tracking overnight gains on Wall Street on Monday after the benchmark Dow Jones ended above 17,000 on the back of encouraging corporate earnings coupled with merger and acquisitions activity.
Japan's benchmark Nikkei ended up 0.6%. Further, investors turned cautious ahead of key economic data from China.
The benchmark Shanghai COmposite ended up 0.2%. Hang Seng gained 0.5% and Straits Times ended nearly unchanged.
European shares were pared early gains and were trading lower ahead of data from Germany and higher-than-expected British inflation data for June. The CAC-40 and DAx were down 0.6% and FTSE was trading 0.1-0.5% lower.
Financial Technologies (India) and Multi Commodity Exchange of India (MCX) ended up over 10% each on the bourses on back of heavy volumes.
BSE Bankex, Capital Goods, Realty and Consumer Durables indices were among the top sectoral gainers up 2.3-3% each followed by Oil and Gas, Auto and Metal indices.
Among the rate sensitive shares banks were among the top gainers led by ICICI Bank gained 3.7%, SBI rose 4.3%, while HDFC Bank and Axis Bank ended up 1-2.8% each.
Capital goods which had witnessed profit
Auto shares trimmed early gains. Tata Motors, M&M, Maruti Suzuki, Bajaj Auto ended 0.4-2.6% higher.
Oil shares firmed tracking stability in global crude oil prices.
Index heavyweight Reliance Industries gained 1.1%. ONGC ended 2.5% higher on talk that the government is considering partial stake in the state-owned oil exploration firm next month.
TCS ended 1% lower ahead of its first quarter earnings on Thursday.
Other Sensex losers include, HDFC, ITC and Dr Reddys among others.
Among other shares, NIIT Technologies slumped 11.5% to end at Rs 409 after reporting 19% year-on-year (yoy) decline in consolidated net profit at Rs 43 crore for the quarter ended June 30, 2014.
IT consulting and software firm had profit of Rs 53 crore in the same quarter last year.
Zydus Wellness dipped 5% to end at Rs 585, extending its Monday’s 6% fall on NSE, after reporting a 25% year-on-year decline in consolidated net profit of Rs 17 crore for the first quarter ended June 30, due to lower operational income.
The company had registered a profit of Rs 23 crore in the corresponding period last year.
Piramal Enterprises tanked nearly 10% to end at Rs 631 after the stock turned ex-dividend today for a dividend of Rs 52.50 per share.
Force Motors retreated from its intra-day highs to end lower by 1%. Bajaj Holdings & Investment sold more than 6 percentage points stake of the company through open market transactions.
TVS Motor Company gained 3.9% to end at Rs 166, extending its previous day’s rally, after the company's market share rose to 12.6% from 12.1% in June quarter, first time in two years.
Advani Hotels and Resorts (India) has hit the upper circuit for second day in a row, up 20% at Rs 62 on reports that ITC Hotels could be close to acquiring the Ramada Caravela Beach Resort.
The broader market outperformed the benchmark indices. The BSE Mid-cap index ended up 2% and the BSE Small-cap index gained 2.3%.
Market breadth ended strong with 1,844 gainers and 1,078 losers on the BSE.