Benchmark BSE Sensex and Nifty closed higher in a highly volatile trade on Monday, riding on the back of a recovery in IT, oil and financial stocks after a two-day fall even as investors remained cautious ahead of the Union budget and policy announcement by the US Federal Reserve.

The 30-share Sensex recovered 169.51 points or 0.29 per cent to settle at 59,500.41 as 17 of its constituents ended in the green. During the day, it rose by 313.34 points or 0.52 per cent to 59,644.24.

The broader NSE Nifty gained 44.60 points or 0.25 per cent to end at 17,648.95 as 29 of its stocks advanced. The index moved in a range of 17,709.15 to 17,405.55 during the day.

Shares of Adani group firms closed on a mixed note with flagship Adani Enterprises climbing 4.21 per cent.

However, Adani Transmission dropped 14.91 per cent, Adani Green by 20 per cent, Adani Total Gas by 20 per cent, Adani Power by 5 per cent, and Adani Wilmar by 5 per cent, a day after the group released a 413-page response to allegations of wrongdoing brought by a US-based short seller Hindenburg Research.

"The response by Adani had a mixed effect on the stock group and market. The saga is likely to continue as a hanging risk in the minds of the investors in the medium-term. Now the focus of the market will be on Budget and Fed policy," said Vinod Nair, Head of Research at Geojit Financial Services.

"Volatility continued to be the order of the day, as benchmark Sensex gyrated nearly 1000 points intra-day before staging a smart comeback in late trades on selective buying. Two big events, the interest rate decision by the US Federal Reserve and the Union Budget are keeping investors nervous," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.

Among Sensex stocks, Bajaj Finance rose the most by 4.61 per cent on positive quarterly results. Ultratech Cement rose by 2.51 per cent, Bajaj Finserv by 2.22 per cent and NTPC by 1.53 per cent.

IT stocks also recovered with HCL Tech rising by 1.85 per cent, Infosys by 1.37 per cent and TCS by 0.72 per cent. Reliance Industries, Maruti, Wipro, M&M, Kotak Bank, Sun Pharma, ICICI Bank also gained.

Among losers, Power Grid fell the most by 3.38 per cent, IndusInd Bank by 2.56 per cent, L&T by 2.11 per cent, Tata Steel by 1.62 per cent, HUL by 1.55 per cent and Tata Motors by 0.45 per cent.

State Bank of India and HDFC were also among the laggards.

In the broader market, the BSE midcap gauge dipped 0.22 per cent and smallcap index fell 0.10 per cent.

Among sectoral indices, utilities slumped 5.74 per cent, power declined 5.30 per cent, oil & gas (4.06 per cent), energy (3.12 per cent), capital goods (1.30 per cent) and metal (1.19 per cent).

IT, teck, consumer durables, telecommunication, consumer discretionary and commodities were the winners.

Elsewhere in Asia, equity markets in Seoul and Hong Kong ended lower, while Tokyo and Shanghai settled in the green.

European markets were trading lower during mid-session deals. Markets in the US had ended higher on Friday.

International oil benchmark Brent crude dipped 0.25 per cent to USD 86.44 per barrel.

Foreign Institutional Investors (FIIs) offloaded shares worth Rs 5,977.86 crore on Friday, according to exchange data.

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