Indian stocks rose sharply in early trade on Monday as a U.S.-brokered ceasefire between New Delhi and Islamabad appeared to be holding, marking a de-escalation in recent armed conflict between the two countries.

The Nifty 50 rose 2.8% to 24,692.90 points, while the BSE Sensex 30 gained 2.5% to 81,397.0 points as of 09:57 am IST (04:27 GMT).

The Nifty has fallen about 1.5% in the past three sessions as India and Pakistan engaged in their worst conflict in nearly three decades. Tensions between the two nuclear-armed neighbors escalated after India struck several so-called terrorist strongholds in Pakistan in retaliation for a deadly attack in the Indian part of Kashmir in April.

U.S. President Donald Trump announced over the weekend that Washington had brokered a ceasefire between India and Pakistan. Despite initial reports that New Delhi and Islamabad had accused each other of multiple violations of the agreement, by Sunday there had been a notable de-escalation in military operations in Kashmir and on the India-Pakistan border.

The focus now is on whether the ceasefire agreement can last and whether tensions between the two countries will ease further.

The two main points of contention are the Indus Water Treaty - reports suggest that it remains suspended despite the ceasefire - and the US offer to mediate talks on Kashmir, which is seen as causing unease in New Delhi.

India withdrew from the Indus Water Treaty in April, blocking a crucial source of water to Pakistan.

In Indian equities, while most sectors were positive, the Nifty Pharma index fell 0.8%, dragged down by major pharmaceutical stocks with large exposure to the United States. Asian drugmakers fell after Trump said he would sign an executive order to cut U.S. drug prices.