Indian shares ended higher on Monday, snapping two days of fall as software services exporter Infosys rallied on weaker rupee, while lenders gained a day before the central bank's policy review.
The broader NSE index provisionally gained 1.12 percent to 7,687.40, while the benchmark BSE index ended 0.95 percent higher at 25,723.16.
The Indian rupee traded at 61.07 a dollar versus Friday's close of 61.18 per dollar. But the currency plunged at 60.87 a dollar on the back of heavy dollar demand from oil refiners.
Overseas investors sold Indian shares worth 10.73 billion rupees ($175.73 million) on Friday and the sentiment remained broadly cautious after foreign investors sold a net $175.73 million worth of shares.
The central bank is widely expected to keep interest rates on hold but analysts said it may loosen tight cash conditions by easing mandatory bond requirements for lenders among other potential measures.
"Symptoms are all positive only. But everything depends on the RBI policy, which will pave the direction for the short-term. Outlooks remains firm and it's still a buy-in-dips market," Reuters quoted Suresh Parmar, head, institutional equities at KJMC Capital Markets.
At 2:45 pm on Monday, State Bank of India gained 0.5 percent, while ICICI Bank added 0.6 percent. Coal India Ltd fell 1.1 percent after it missed the production target for July.
Shares in Indian tyre makers' gained after traders noted rubber prices hovering near their lowest levels in four-and-a-half years. Better monthly auto sales also lifted the sentiment. At 1.40 pm, Shares in Apollo Tyres Ltd surged 3.2 percent, while JK Tyre and Industries Ltd rose 5.2 percent.
Indian market traded higher after posting biggest fall in over 3 weeks on Friday as part of a global market rout. Interest sensitive stocks led the profit ahead of RBI's policy review on Tuesday.
While RBI is widely expected to keep rates on hold, traders hope RBI will maintain less hawkish tone on inflation as displayed in June.
Syndicate Bank Ltd slipped as much as 8.2 percent after its chairman was arrested over allegations of taking bribes to grant loan extensions to a company. The stock had already slumped 18 percent in July on profit-taking in mid-cap shares.
With inputs from Reuters.