The BSE Sensex rose more than 6 percent on Monday after the finance minister said the government was working on more measures to improve liquidity and the country would respond swiftly depending on the needs of the situation.
The rise, which is set to end a five-day losing streak, was underpinned by gains elsewhere in Asia after policymakers and regulators around the world took a slew of measures to shore up the battered financial system.
No. 2 lender ICICI Bank rose nearly 25 percent after its chief executive said on Monday deposits with the bank were safe and it had a cushion to take domestic and overseas shocks.
His statements came amid concerns about ICICI's potential exposure to the global financial crisis, which had knocked its shared down more than 70 percent in 2008 by the end of last week. The stock was trading up 23 percent at 448.50 rupees.
"There have been unprecedented policy action around the world, including in India, and this has provided a short-term stability to the markets," said Amitabh Chakraborty, president of equities at Religare Securities.
"But the trend is still very uncertain and the fundmentals are not giving big conviction."
By 12:05 p.m., the 30-share BSE index was up 6.3 percent, or 664 points, at 11,191.85 with just one stock in negative territory.
The benchmark lost nearly 16 percent last week -- its worst performance since December 1990.
Finance Minister Palaniappan Chidambaram said on Monday the government, the central bank and the stock market regulator were coordinating on an hourly basis regarding the fallout of the global financial crisis on the Indian market.
Global equity markets were gutted last week, and investors even liquidated positions in safe havens like government bonds for cash, on dwindling hopes that anything could be done to keep the global economy from sliding into recession.
Mumbai brokerage India Infoline said it was not convinced the correction in India's markets had ended and advised investors to stay on the sidelines till global markets stabilised.
"The turmoil in the global credit markets is still far from over, and it's possible that FIIs would continue to stay away from emerging markets for some time to come," it said, referring to foreign institutional investors.
"One should not get carried away if there is any kind of a bounce back, as further selling is expected."
Foreign funds have sold a net $10.3 billion in Indian stocks in 2008 and the index is down about 45 percent this year. In comparison, they ploughed in a record $17.4 billion in 2007, lifting the benchmark 47 percent.
Shares in Reliance Industries, India's top listed firm, rose 2.9 percent to 1,571.90 rupees and outsourcer Infosys Technologies was up 5.1 percent at 1,288.80 rupees. The two stocks account for more than 23 percent of the BSE index.
In the broader market, 1,418 gainers led 981 losers on volume of 125 million shares.
The 50-share NSE index rose 5.6 percent to 3,463.
STOCKS ON THE MOVE
* Tata Consultancy Services was up 13.3 percent. India's largest software services exporter said on Monday it had signed an outsourcing deal worth 10 billion rupees with the Indian government.
* Axis Bank gained 13.3 percent to 625.6 rupees after the private sector lender reported a 77 percent rise in quarterly net profit. The bank also said it planned to form an asset management company with a unit of LCF Rothschild Group.
* Bharti Airtel added 7.6 percent to 744 rupees. The top mobile firm's chief executive said on Monday it expects to roll out services in Sri Lanka soon after inter-connection issues with local telecom firms were sorted out.
MAIN TOP 3 BY VOLUME
* ICICI Bank on 7.9 million shares
* Reliance Natural Resources on 4.2 million shares
* IFCI on 3.9 million shares
