Shares rose over 1% on Tuesday, helped by broad-based gains as global stock markets rebounded with investors focussed firmly on U.S. Federal Reserve's policy decision this week.
The NSE Nifty 50 index rose 1.3% to 17,857.80, as of 0502 GMT and the S&P BSE Sensex was up 1.3% at 59,903.45
"Markets are pricing in 75 basis points rate hike from the U.S. Federal Reserve and if it is less than that it will be a positive surprise," said AK Prabhakar, head of research, IDBI Capital.
"Indian markets are better placed compared with global markets," Prabhakar said, adding that a lot of domestic investor money has been coming into the market, saving it from big corrections.
Foreign investors on Monday sold $435.6 million worth of Indian equities, Refinitiv Eikon data showed. The Nifty index is up 2.9% so far this year.
Rate-sensitive banking stocks were up, with Bank Nifty index gaining 1.6%. Last week, the index hit a lifetime high on the back of expectations of strong credit growth with the onset of festive season.
The Nifty IT index, metals index and auto index were the other top gainers rising 1.9%, 1.93% and 2.2%, respectively.
Shares of construction company Ircon International gained as much as 5.7%, after winning an order worth 2.56 billion Indian rupees ($32.13 million).
Asian shares edged up in early trade on Tuesday following a rebound in the final hour of New York trading.
"India's economy stands out as an outlier, benefiting from enhanced food security, deleveraged private sector balance sheets and more room to use fiscal tools to mitigate the relative price shocks emerging market Asian economies are facing," Barclays said in a note.
