Benchmark indices Sensex and Nifty rebounded in early trade on Monday, mirroring a sharp rally in global markets, as softer-than-expected US inflation report has reignited hopes of Fed rate cuts.

Prospects of a US–China trade deal and fresh foreign fund inflows also added to the markets' optimism.

The 30-share BSE Sensex climbed 272.7 points to 84,484.58 in early trade. The 50-share NSE Nifty went up by 88.55 points to 25,883.70.

From the Sensex firms, Tata Steel, Bharti Airtel, Reliance Industries, State Bank of India, HDFC Bank and NTPC were among the major gainers.

However, Infosys, Bharat Electronics, Kotak Mahindra Bank and Bajaj Finance were among the laggards.

In Asian markets, South Korea's Kospi, Japan's Nikkei 225 index, Shanghai's SSE Composite index and Hong Kong's Hang Seng traded sharply higher.

US markets ended in positive territory on Friday.

"The global market construct is bullish. With Dow Jones, Nikkei and Kospi at record highs, the sentiments are positive. Globally, there are signals of declining trade tensions," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

Foreign Institutional Investors (FIIs) bought equities worth Rs 621.51 crore on Friday, according to exchange data.

"A softer-than-expected US inflation report has boosted hopes of Fed rate cuts. Adding to the optimism are prospects of a US–China trade deal and possible US tariff cuts on Indian imports to 15–16 per cent," Prashanth Tapse, Senior VP (Research), Mehta Ltd, said.

Global oil benchmark Brent crude climbed 0.23 per cent to USD 66.09 a barrel.

On Friday, the Sensex dropped by 344.52 points or 0.41 per cent to settle at 84,211.88. The Nifty declined by 96.25 points or 0.37 per cent to 25,795.15.