Indian stock markets closed higher on Tuesday, with the Sensex gaining 685 points and the Nifty 50 rising 220 points, marking a second straight day of gains after an eight-week losing streak. Banking and financial shares led the rally while IT, realty and PSU banks ended in the red.

Tata Group retail company Trent jumped more than 11 per cent on a strong quarterly update, while Kotak Mahindra Bank, Axis Bank and Reliance Industries supported the indices. Short covering ahead of the weekly Nifty expiry and buying by domestic institutional investors added to the momentum. Foreign investors remained net sellers, offloading shares worth Rs 9,484 crore on October 1.

All eyes are now on the Reserve Bank of India’s monetary policy decision on Wednesday. The three-day MPC meeting began on Tuesday, and the market consensus expects a 25-basis-point repo rate hike, which would be the first increase since February 2023. Brent crude hovered near $100 a barrel, keeping inflation concerns alive. Analysts said the market must hold above the 22,580-22,600 zone on the Nifty to extend the recovery.