Indian shares rose on Monday to their highest close in nearly a month as stocks of companies such as Tata Steel gained after promising manufacturing data at home and in China eased concerns about slowing economic growth.
An HSBC survey showed on Monday that Indian manufacturing returned to growth last month as a strong rise in orders pushed factories to step up production.
The report came after data on Friday showed India's economy grew more than expected in the July-September quarter, sparking hopes that economic growth may have bottomed.
Traders say the U.S. nonfarm payrolls data on Friday and the outcome of elections in several states on Dec. 8 would be key for the short term.
"The Street fears that if the data comes as per expectations, the Fed will signal an unwinding of its $85 billion bond-buying programme, which boosted the global markets so far," said Jyotheesh Kumar, executive vice-president of HDFC Securities.
The outcome of state elections would also be important to validate traders' expectations of a clear winner, Kumar added.
The benchmark BSE index rose 0.51 percent, or 106.08 points, to end at 20,898.01, marking its highest close since Nov. 5.
The broader NSE index rose 0.68 percent, or 41.75 points, to end at 6,217.85, marking its third consecutive day of gains. It closed above the psychologically important 6,200 level.
Steel shares gained, with Tata Steel Ltd up 1.9 percent and Jindal Steel and Power Ltd rising 4 percent, benefiting after China's factory activity maintained steady growth momentum in November.
Financial shares gained, with IDFC Ltd rising 2.7 percent on expectations it would get a banking licence.
Axis Bank Ltd gained 3 percent ahead of inclusion in India's benchmark BSE index on Dec. 23.
Larsen and Toubro Ltd rose 2.3 percent after the company said on Friday it was evaluating options "for monetisation" of assets belonging to its unit L&T Infrastructure Development Projects Ltd.
Indian Oil Corp Ltd gained 1.2 percent after the company said on Saturday it would raise retail prices of diesel by 1 percent, or 0.57 rupees (1 cent), from Sunday in line with a plan to gradually align them with international prices.
Hindustan Petroleum Corp rose 1 percent, while Bharat Petroleum Corp gained 1.6 percent each.
Among stocks that fell, Power Grid Corp of India Ltd shares fell 1.6 percent. The company said on Friday the price band for its follow-on offer was fixed at 85 rupees to 90 rupees per share, a discount to its current market price of 93.65 rupees.
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