Mumbai: The Sensex looked strong on Tuesday after a bright start ahead of the RBI monetary policy review that kicks off later in the day.
The central bank's two-day monetary meet starts on Tuesday and the decision is due for Wednesday.
The BSE Sensex traded at 31,542.74 at 1158 hours, up 259.02 points, or 0.83 per cent. The broader Nifty was above the key 9,850 level at 9,869.75, higher by 81.15 points, or 0.83 per cent.
Sentiment turned positive on expectations that the RBI would pull the trigger, with rate sensitive auto stocks stealing the show.
Tata Motors leaped the most by 4.05 per cent, Asian Paints rose 3.49 per cent, Bajaj Auto 2.41 per cent and M&M 2.17 per cent.
The buying spell was steered by consumer durables, auto, energy, metal and FMCG indices.
Also, manufacturing activity in India expanded in September for the second month in a row, driven up by increase in output and new orders, even as their growth pace remained weak in the context of historical trend, a PMI survey said on Tuesday.
Asian markets turned higher after the prospect of American tax cuts kept investors in good spirits. Markets in China and South Korea remain shut.
Share outflow from foreign portfolio investors (FPIs) continued at net worth Rs 1,546.86 crore last Friday, showed provisional data from exchanges. Domestic institutional investors (DIIs) bought shares net Rs 2,064.63 crore.
US equities closed at record highs on Monday as Wall Street kicked off the fourth quarter on a high note on optimism about recovery in manufacturing.