The NSE Nifty 50 index closed up 1.24% at 11,813.5 and the S&P BSE Sensex ended 1.24% higher at 40,261.13.
The Nifty Banking Index added 3.17%, led by a 6.6% gain in ICICI Bank Ltd, which rallied for a second session following upbeat earnings on Saturday.
The Financials Index gained 3.14%, with heavyweight HDFC Ltd rising 3.95% on the back of strong earnings from Monday.
India's biggest lender State Bank of India closed 4.2% higher ahead of its earnings report scheduled on Wednesday.
"It is purely earnings momentum driving banks and financials after ICICI Bank and HDFC reported some good results," said Amit Kumar Gupta, portfolio manager at Adroit Financial Services.
Banks and financial stocks make up about 35% https://www1.nseindia.com/content/indices/ind_nifty50.pdf of the Nifty's total weightage among sectors.
India's factory activity expanded at its fastest pace in over a decade in October, a private survey showed.
"Demand that was declining because of the lockdown is now recovering and manufacturing is picking up," Gupta said.
Metal stocks also contributed to gains as miner Hindalco Industries Ltd added 4.95% and helped the Nifty Metals Index end 2.24% higher.
Drugmaker Sun Pharmaceutical Industries Ltd ended up 3.85% after its September-quarter profit beat estimates.
Fertilizer maker UPL Ltd fell about 6.6% and was the session's top laggard.
Asian markets rose ahead of the U.S. presidential election as incumbent Donald Trump and his Democratic rival Joe Biden sought to secure votes in key states.
(Reporting by Derek Francis in Bengaluru; Editing by Ramakrishnan M.)
By Derek Francis