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The benchmark indices started August on a positive note with Sensex rising above 500 points and Nifty over 180 points on positive global sentiments.

At close, Sensex ended up 545.25 points or 0.95 per cent at 58,115.50, while Nifty ended 181.80 points or 1.06 per cent higher at 17,340.05.

About 2,299 shares have advanced, 1,162 shares declined, while 195 shares remained unchanged. Mahindra & Mahindra Ltd, Power Grid Corporation of India Ltd, NTPC Ltd, Bharti Airtel and Maruti Suzuki India Ltd were the major gainers on the Sensex.

Auto banks, media stocks were major contributors to the rally in the market. Tata Motors and Mahindra gained 6 per cent on Monday. Broad market indices, i.e., midcap and smallcap indices, rose more than the Nifty and the advance decline ratio was sharply positive at 2.53:1.

Asian stocks also ended in green, extending Friday's rally, while European stocks too opened higher.

"Strong global cues and optimistic vehicle sales numbers from select frontline automobile companies fuelled another round of rally in domestic equities. The overhang of the US policy rate decision is now behind us and the focus is now on the RBI policy meeting scheduled later this week where traders expect the rate hike could be on expected lines," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.

Meanwhile, buying by foreign investors also remained a major factor in the rise in benchmark indices. Foreign investors turned buyers in July nearly after 10 months, with an investment of around Rs 4,980 crore in the Indian equity markets. This came after heavy sell-off by these entities of around Rs 50,203 crore.

According to NSDL data, investment of foreign investors in July stood at Rs 4,989 crore, as compared to over Rs 50,000 crore outflows in June, Rs 39,993 crore in May and Rs 17,144 crore in April.

"FPIs turning net buyers is the major factor driving the uptick in the domestic market. Record low unemployment rate in the Eurozone and fall in crude oil prices increased optimism globally. Auto stocks were in focus post the release of positive auto sales numbers," said Vinod Nair, Head of Research at Geojit Financial Services.

Meanwhile, goods and services tax (GST) collection posted an increase of 28 per cent year-on-year to Rs 1.49 lakh crore.

India's manufacturing activity also improved in July with PMI rising to an eight-month high of 56.4. In June, India's manufacturing PMI was at a nine-month low of 53.9.

Market participants expect the indices to rise further in the coming days, considering the positive global cues and moderation in commodity prices.

"Going by the current momentum, Nifty could test the 17,475-17,651 band over the next few days. A lot of upgaps on the way up also raise the possibility of these gaps being filled after Nifty makes an intermediate top," said Deepak Jasani, Head of Retail Research, HDFC Securities.