BENGALURU: Indian shares rose more than 2% on Monday to hit their highest in two-and-a-half months, driven by gains in private lender HDFC Bank and mortgage lender Housing Development Finance Corp after the companies decided to merge their operations.

The NSE Nifty 50 index was up 2.2% at 18,060, as of 0501 GMT, and the S&P BSE Sensex rose 2.5% to 60,733.05.

HDFC Ltd climbed 15.5%, hitting its highest since late November, while HDFC Bank rose about 13% to a level unseen since mid-October.

The Nifty bank index rose 4.1% and the finance index surged 5.9%, while other indexes witnessed muted gains.

The market movement is largely due to the "unexpected announcement" of the merger, said Saurabh Jain, assistant vice president at SMC Securities.

"This is a very positive news in the sense the foreign institutional investors holding will increase after the merger," Jain said.

Both HDFC and HDFC Bank were major laggards last year, gaining 1.1% and 3%, respectively, compared with a 13.5% rise for the Nifty bank index.

Shares of power utility operators such as NTPC Ltd and Tata Power rose 2% each as demand for power surged due to hotter weather.

Market participants will be closely watching the monetary policy decision by the country's central bank on Friday.

Meanwhile, global share markets were mixed on Monday amid talks of yet more sanctions against Russia over its invasion of Ukraine.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)