Mood also remained positive on expectations that EPFO will start investing in the equity market this week, brokers said.
    
"Banking stocks led the rally on the benchmark indices on hopes of a rate cut by the RBI in the policy tomorrow. Strong rupee and continued fall in crude prices lifted the sentiment," said Gaurav Jain, Director at Hem Securities.

Weak Asian cues tried to spoil the party, but sentiment remained positive due to rally in banking stocks on government's move to infuse capital into state owned banks.
    
The BSE banking index spurted by 0.99 percent. Continuing its upward journey for the fourth straight day,  the 30-share BSE barometer rose 72.50 points to close at over one-week high of 28,187.06.
    
Intra-day, it shuttled between 28,263.35 and 28,071.37. The gauge has gained 727.83 points in four days.
    
The 50-share NSE Nifty settled higher by 10.20 points or 0.12 percent at 8,543.05. During the session, it moved between 8,563.95 and 8,508.10.
    
Even as the Reserve Bank is expected to keep policy rates unchanged at its review tomorrow, some investors remain hopeful that the fall in oil prices and slowing core sector growth may lead to a surprise cut.
    
Moreover, a healthy sales growth in July posted by major car makers, including Maruti Suzuki and Tata Motors, coupled with better earnings by some blue-chips, came as a positive.
    
Maruti Suzuki climbed 2.29 percent after the company said its domestic sales rose 22.5 percent last month to 1,10,405 units as against 90,093 in July last year while Tata Motors surged 0.99 percent after it reported 1.32 percent increase in total sales in July.
    
Asian markets closed lower after China manufacturing activity dropped to a two-year low in July, while the European markets were down in their early trade.

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