Indian shares started the week on a positive note on optimism fuelled by a likely stimulus by the Modi government. Finance minister Nirmala Sitharaman on Friday had tweeted that she was in talks with the Prime Minister's Office on a stimulus package and that it would be announced at the right time.

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Trade sentiment also improved as Asian shares gained on reports of an ebbing bond rally in the US and potential stimulus by China and Germany.

The 30-share benchmark S&P BSE Sensex surged 186 points, or 0.50 percent, to 37,536 in the initial trade. The broader 50-share NSE Nifty gained almost 54 points, or 0.49 percent, to trade at 11,101.50.

The Nifty MidCap index also surged in tandem with the broader market peer rising 0.52 percent. The banking gauge, Nifty Bank, surged 0.59 percent.

All sectors advanced with pharma, IT, bank, auto, FMCG, infra and metal leading.

Indiabulls Housing Finance, Dr Reddy's, Sun Pharma, Bharti Infratel, Cipla and L&T were the top Nifty gainers, while Power Grid, UPL, SBI, Yes Bank, Tata Motors and Britannia were the top losers.

Sun Pharma surged nearly 1.7 percent after the pharma company signed a licensing pact with China Medical System Holdings for generic products. Dr Reddy's Labs gained 1.4 percent.

Meanwhile, the Indian rupee opened marginally lower

against the US dollar on Monday on the back of the strength in the American unit. The home currency started at 71.16 against its Friday’s close of 71.14.

Foreign institutional investors (FIIs) remained net buyers in the capital markets, pulling out Rs 1,339 crore on Friday, according to provisional data. However, foreign portfolio investors (FPIs) sold equities worth Rs 10,416.25 crore on a net basis during August 1-16 period.

FPIs, however, invested a net Rs 2,096.38 crore in the debt securities during the period.

In debt markets, the yields on the 10-year government bonds were up 0.15 percent to 6.56 percent from its previous close of 6.55 percent. Bond yields and prices move in opposite directions.

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