The Bombay Stock Exchange benchmark Sensex rose on Monday by over 40 points in early trade on selective buying by funds and retailers ahead of the second stimulus package likely to be announced by the government this week.
The Sensex, which had gained 23.48 points in the previous session, moved up further by 40.73 points to 10,140.64 in initial five minutes of trading with shares of realty, auto and PSU sectors showing a rising trend.
The wide-based 50-share Nifty of the National Stock Exchange also improved by 16 points to 3,093.50 from its last close of 3,077.50 last week.
Banking shares were in good demand after the country's largest lender, State Bank of India, announced a cut in interest rates.
Marketmen said hopes that the government might announce second stimulus package to revive the slowing economy influenced the trading sentiment.
However, they said, market players were reluctant to create any huge positions ahead of the monthly derivatives settlement on Wednesday as the market will remain closed on Thursday for Christmas.
Among banking stocks, State Bank of India gained Rs 25.45, or 1.98 per cent to Rs 1,313.10, while HDFC Bank gained Rs 2.60, or 0.25 per cent to Rs 1054.
Other gainers were, DLF Ltd, ACC, ONGC, Tata Motors, Tata Steel and Grasim Industries.
Country's most valuable company Reliance Industries was under pressure and fell by Rs 24.25, or 1.8 per cent to Rs 1,325 cent to Rs 1,310 on massive selling, triggered by negative corporate reports.
However, among other Asian markets Hong Kong's Hang Seng index was down by 1.67 per cent, while Nikkei rose 1.17 per cent higher in early trade.