The BSE Sensex climbed 2 percent on Monday, as Asian markets rallied on renewed Eurozone hopes to tackle the region's debt crisis and investor confidence being handed a boost courtesy the government's move to jumpstart key reforms.

BSE

BSE Sensex

Traders said there was hectic short-covering in financial and export-driven software services companies beaten down during a four-week market slide that last weel pulled the main index to its lowest close in more than two years.

Top lender, the State Bank of India (SBI), was up 3.07 percent, while rivals ICICI Bank and HDFC added 3.3 percent and 1.3 percent, respectively. Leading software services exporter Tata Consultancy Services rose 2.3 percent, Infosys firmed up at 1 percent and Wipro was up 1.4 percent.

By 12:04 p.m. (0634 GMT), the main 30-share BSE index was up 1.86 percent at 15,985.78, after rising more than 2 percent and all but two of its components gained.

The rise was underpinned by gains in bourses across Asia, which was helped by hopes that Europe will come up with concrete steps this week, towards activating a crucial Eurozone bail-out fund and reports that the International Monetary Fund (IMF) is considering helping Italy.

Traders said the local market, which is down 23 percent in the year to date, was oversold and positive trends elsewhere were further supported by domestic factors such as the decision by the government, made last week, to allow global supermarket giants such as Wal-Mart Stores Inc. and Tesco to enter India with a 51 percent stake.

The FDI ruling by the government has gone down very well with the international community, said Gajendra Nagpal, Chief Executive of Unicon Financial Intermediaries.

This will reinforce the fact that policy initiatives which were lacking will start to come back, he added.

The opening up of the retail sector was the biggest reform, in years, undertaken by the ruling coalition. Property developers DLF, which could benefit from demand for malls as foreign investment in multi-brand retail picks up, rose more than 3 percent, adding to gains of nearly 5 percent over two sessions. Retail stocks such as Pantaloon Retail were trading down 4.9 percent after soaring more than 30 percent over two sessions. Shoppers' Stop and Trent were also down on profit-taking.

Axis Bank traded up 2 percent after the private-sector lender said it was monitoring exposure to infrastructure projects and was choosy about large projects. Energy majors, Reliance Industries, which has the heaviest weight on the main index, rose 2 percent. Suzlon Energy rose more than 4 percent after it signed a contract for a 75 MegaWatt power project worth Rs. 4.7 billion.

The 50-share NSE index was up 1.87 percent at 4,798.2. In the broader market, there were 4.7 gainers for every loser on volume of about 166.5 million shares.

The MSCI's measure of Asian markets other than Japan was up 2.28 percent.

STOCKS ON THE MOVE

* Madhucon Projects jumped nearly 7 percent after the company said it won a contract worth Rs. 4.22 billion.

* Steel Authority of India rose 4 percent after the Financial Chronicle reported the company was in talks with two or three possible targets in New Zealand and Australia to buy coking coal assets.

TOP 3 BY VOLUME

* Sujana Towers on 13.7 million shares

* Suzlon Energy on 9 million shares

* Tata Motors on 6.4 million shares