Indian shares rose nearly 1 percent on Monday, heading for a third straight session of gains as consumer goods makers such as ITC Ltd surged on hopes the newly implemented goods and services tax (GST) would reduce retail prices and boost sales.
India on Saturday rolled out its biggest tax reform in the 70 years since independence from British colonial rule, replacing more than a dozen federal and state levies with the GST.
The unveiling of GST led some of India's biggest automakers and retailers to announce price cuts, although many companies shied away from doing so due to the complexity of the new system.
"FMCG companies like ITC are going to benefit in the long run from the GST rollout," said Anupam Singhi, chief operating officer at independent research firm William O'Neil India.
The broader NSE Nifty was up 0.88 percent at 9,604.65 as of 0602 GMT, while the benchmark BSE Sensex was 0.90 percent higher at 31,201.15.
NSE's Nifty FMCG index climbed as much as 5.6 percent to an all-time high with Hindustan Unilever Ltd gaining above 1 percent.
Cigarette maker ITC was among the top gainers, rising as much as 9.62 percent to a record high of 354.80. It drove the Nifty index higher, contributing nearly 45 net points to the index.
Carmaker Maruti Suzuki India gained as much as 1.8 percent after posting a 7.6 percent jump in June vehicle sales on Saturday, while commercial vehicles maker Ashok Leyland climbed to its highest in a year after reporting an 11 percent rise in June total sales.
Shares of fertiliser makers surged after GST rate for fertilisers was slashed to 5 percent on Friday. Chambal Fertilisers and Chemicals Ltd was up as much as 4 percent while Nagarjuna Fertilizer & Chemicals and Madras Fertilizers gained more than 3 percent.
(Reporting by Vishal Sridhar in Bengaluru; Editing by Gopakumar Warrier)