The markets came off the day's high after the government released the IIP figures for January 2012, however, ended the trading session in the green.
The BSE Sensex ended higher by 84 points at 17,588, while the Nifty ended at 5,360, up 26 points.
During the day, the BSE Sensex had touched the day's high at 17,772 and the day's low at 17,495.
According to data released on Monday, Index of Industrial Production or the IIP grew by 6.8% year-on-year in January 2012.
The cumulative growth for the period April-January 2011-12 stands at 4.0% over the corresponding period of the previous year, the government data shows.
A good industrial output print for February would mean India's economy is moving to a normal growth trajectory, the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, said today.
Meanwhile, European markets are mixed today. At 1600 hours, the DAX was up 0.33% while the CAC 40 gained 0.14%.
The FTSE 100 was off 0.03%.
In Asia, Japan's Nikkei share average dipped after breaking above 10,000 to a fresh seven-month high as hedge funds locked in profits following a 3.7% rally in the previous two sessions and 17% so far this year.
The Nikkei slipped 0.4% to 9,890.
The Shanghai Composite index ended marginally lower by 0.19% while the Hang Seng ended at 21,134, up 0.23%.
Back home, BSE Capital Goods, Consumer Durables, Realty and Oil & Gas indices, up 1-3% each, led the gains.
According to the industrial output data, the capital goods sector registered a contraction of just -1.5% in January compared with a contraction of -16.3% in December.
Havells India, Larsen & Toubro, BEML, Siemens and Suzlon Energy, up 2-4% each, were the prominent gainers from the Capital Goods' space.
L&T gained 4%, extending its Friday's 5% rally after the Board decided to bifurcate the role of Chairman and Managing Director into two positions.
The company has appointed Mr K Venkataramanan as Chief Executive Office and Managing Director with effect from April 1, 2012
Banking shares rallied on the bourses after a higher than expected cut in the cash reserve ratio by the Reserve Bank of India, in order to help ease the liquidity situation in the banking system.
The RBI on Friday after market hours reduced the CRR -- the portion of deposits banks have to keep with the central bank -- by 75 basis points.
This will infuse Rs 48,000 crore liquidity into the system. BSE Bankex index advanced 1% at 12,234.
Among individual stocks, State Bank of India, Federal Bank, Bank of Baroda and ICICI Bank up 2-4% each, were the prominent gainers.
On the Sensex, SBI, L&T, Reliance Industries, Jindal Steel and BHEL were the top gainers, having gained 2-4% each.
The losers from the pack were Mahindra & Mahindra, Cipla, ONGC, Infosys and TCS, down 1-2% each.
Railway stocks moved higher during the day's trading session on hopes of positive changes in the upcoming Railway Budget 2012.
On Wednesday, March 14, Minister for Railways, Dinesh Trivedi would be presenting the Railway Budget for the financial year 2012-2013.
According to reports, industry experts hope that the railway Budget will reduce export levy on iron ore fines which would, in turn, push up exports.
Given the financial condition of railways, this Rail Budget is also likely to seek a two-year moratorium on paying dividend to the government.
From individual stocks, Titagarh Wagons gained 1.2% at Rs 434. BEML added 3.2% to Rs 689.
Stone India was up 2% at Rs 36 while Kalindee Rail Nigam moved up 1.4% to Rs 115.
The overall market breadth was positive as 1,599 stocks advanced against 1,246 declining ones, on the BSE.
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