The gains were modest as the interim budget by P. Chidambaram largely stuck to expected lines, delivering on its fiscal deficit commitments by containing expenditure. It lacked any major policy announcements and limited itself to tax sops for some industries.Defensive stocks like technology and pharma continued to attract interest, .
The Sensex closed 0.48 per cent higher at 20,464.06, while the broader Nifty closed up 0.41 per cent at 6,073.30.
Auto shares rose after the finance minister proposed excise duty reductions on small cars, two-wheelers, commercial and larger vehicles in the interim budget for 2014/15. Two-wheeler maker Hero Motor Corp gained 1.83 per cent, while utility vehicle maker Mahindra and Mahindra rose 2.62 per cent.
Bank stocks also rose, with HDFC Bank gaining 1.34 per cent, while ICICI Bank was up 2.09 per cent, tracking positive sentiment from the government's planned borrowing and fiscal deficit targets and infusion of $1.8 billion into state-run banks.
Shares of power companies gained, with Tata Power closing 4.87 per cent higher after activist-turned-politician Arvind Kejriwal resigned as chief minister of Delhi on Friday, frustrated by obstacles put in the way of the Jan Lokpal bill.
Jet Airways ended up 3.26 per cent on expectations that Etihad may be forced to make an open offer to retail shareholders after the market regulator served notice to the Abu Dhabi-based airline, a source told Reuters.
DLF lost 1.69 per cent after its December-quarter net profit lagged estimates when adjusted for 1.92 billion rupees of tax credit.