Indian shares rose more than 1 percent on Monday as expectations of a rate cut by the central bank lifted lenders and as auto makers such as Maruti Suzuki <MRTI.NS> rallied after reporting strong sales for September.
Sentiment was also boosted as Asian shares got the new quarter off to a firm start, with MSCI's broadest index of Asia-Pacific shares outside Japan gaining 0.8 percent, as concerns eased about the health of German lender Deutsche Bank.
The Reserve Bank of India is due to hold its policy review on Tuesday, with a monetary policy committee set to fix interest rates for the first time.
Analysts were broadly divided on the outcome, with about 60 percent of the 44 analysts polled by Reuters expecting the central bank to hold rates and the rest expecting at least a 25 basis point cut.
The meeting on Tuesday will also be Urjit Patel's maiden policy review as the governor.
"There is some optimism because of an expectation of a rate cut," said Saurabh Jain, assistant vice president of research at SMC Global Securities.
The broader NSE Nifty was up 1.11 percent at 8,706.60 as of 0615 GMT, while the benchmark BSE Sensex was 1 percent higher at 28,142.80.
Banking stocks were among the top performers. IndusInd Bank Ltd <INBK.NS> and HDFC Bank Ltd <HDBK.NS> led the rise with gains of 3.37 percent and 1.19 percent, respectively.
Meanwhile, State Bank of India <SBI.NS> rose 2.15 percent after the government extended Chairman Arundhati Bhattacharya's term by one year, allowing her more time to lead a clean-up of bad assets and oversee a merger of affiliates.
Auto makers also gained on the back of upbeat monthly sales.
Maruti Suzuki Ltd <MRTI.NS> rose as much as 4.43 percent to a record high after posting a rise of 31 percent in September vehicle sales.
Mahindra and Mahindra Ltd <MAHM.NS> and Eicher Motors Ltd <EICH.NS> rose over 3 percent each, while Tata Motors Ltd <TAMO.NS> was up 2.08 percent.
On the Nifty, the IT index was the only sector in red. Tata Consultancy Services Ltd <TCS.NS> was the biggest percentage loser, falling as much as 1.22 percent.
(Reporting by Darshana Sankararaman in Bengaluru; Editing by Subhranshu Sahu)