Indian shares rose on Monday as auto makers such as Maruti Suzuki Ltd gained after an increase in the goods and services tax (GST) was less wide-ranging than expected, with sentiment also supported by higher Asian markets.
Investors in Asia reacted with relief after North Korea did not conduct another missile test this weekend, when it celebrated its founding anniversary. The MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent.
Still, sentiment was broadly cautious after indexes posted their first weekly fall in four last week, as investors monitored global risk factors and awaited consumer inflation data due on Tuesday.
India's retail inflation is expected to have picked up to a five-month high of 3.20 percent in August, largely driven by higher food costs, a Reuters poll showed on Monday, potentially reducing the scope of further rate cuts by the Reserve Bank of India (RBI).
The markets are in a wait-and-watch mode ahead of the CPI data, said Vinod Nair, Head of Research at Geojit Financial Services.
The broader NSE Nifty was up 0.75 percent at 10,009.50 as of 0605 GMT, while the benchmark BSE Sensex was 0.72 percent higher at 31,915.96.
Shares of Indian carmakers such as Maruti Suzuki India Ltd , Tata Motors Ltd and Mahindra and Mahindra Ltd were up more than 0.5 percent each.
The government said on Saturday it would increase taxes for mid-sized, large, and sports utility vehicles under the recently unveiled nationwide tax.
The quantum of the increase was less than expected and tax rates for smaller cars and hybrid vehicles were not raised, comforting investors.
Among other gainers, shares of IndusInd Bank Ltd rose 1.1 percent, while Bharat Financial Inclusion Ltd gained more than 3 percent after the financial firms entered into exclusive talks for a potential strategic combination.