New Delhi, Apr 4 (IANS): India's key equity indices -- Sensex and Nifty -- extended their gains from the previous week and gained sharply in early trade on Monday.

The key benchmark indices opened on an upbeat note driven by gains in HDFC and HDFC Bank as the two announced a merger deal.

Housing Development Finance Corporation (HDFC) on Monday said its board has approved the merger of its wholly owned subsidiaries HDFC Investments and HDFC Holdings with HDFC Bank.

At 10.30 a.m., Sensex was 2.5 per cent or 1,452 points up at 60,729 points, whereas Nifty 2.2 per cent or 389 points up at 18,060 points.

"Segments not impacted by the growth slowdown and higher inflation like IT, telecom, oil and gas producers and attractively valued financials are likely to find favour with investors in the near term," said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Reacting to the merger news, shares of HDFC and HDFC Bank rose as high as 14 per cent and 11 per cent, respectively, during the opening session.

Among the sectoral indices, barring Nifty realty, all other indices traded sharply higher in the opening session, data showed.