Reuters Market Eye - The BSE Sensex gains 0.6 percent, while the broader Nifty is up 0.71 percent, extending gains after an HSBC survey showed Indian manufacturing returned to growth last month as a strong rise in orders pushed factories to step up production.
Steel shares gain, Tata Steel up 2.1 percent while Jindal Steel and Power up 4.2 percent, also benefitting after China's factory activity maintained steady growth momentum in November.
Financial shares lead the gains with IDFC rising 2.9 percent on continued hopes it would get a banking licence. Axis Bank gains 2.4 percent ahead of inclusion in India's benchmark BSE index on December 23.
Larsen and Toubro gains 1.4 percent after the company said on Friday it was evaluating options "for monetisation" of assets belonging to unit L&T Infrastructure Development Projects (IDPL).
Indian Oil Corp gains 1 percent after the company said on Saturday it would raise retail prices for 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 and Bharat Petroleum Corp also gain 1 percent each.
(Reporting by Abhishek Vishnoi)