The BSE Sensex surged to its highest in 14 months, with retailers such as Pantaloon Retail India and airlines including SpiceJet rallying after the government opened up the sectors to foreign direct investment.
India announced a slew of big-ticket reforms after the market close on Friday as the country's economy grew at the slowest pace in three years.
Foreign investors are expected to be big buyers of Indian stocks on Monday, after purchasing a net 28.3 billion rupees on Friday, their biggest single-day purchase since July 3.
The measures were a "huge signal, symbolic of the government's reform commitment and an endorsement of its recognition of the urgency to put the economy above politics, for now," Deutsche Bank said in its note.
The index gained 0.88 percent as of 9:53 a.m., after earlier hitting its highest since July 26, 2011. The Nifty rose 0.93 percent.
Both indexes are headed for a ninth consecutive winning session.
But investors also remained wary ahead of the RBI's monetary decision due out at 11 a.m. Analysts expect the Reserve Bank of India to keep its rates on hold for now.
(Reporting by Mumbai markets team; Editing by Ryan Woo)
($1 = 54.4150 Indian rupees)