Equity benchmark indices Sensex and Nifty finished with gains for the second successive day in this week, closing with nearly half a percent in the green.
The 30-share BSE index gained 129.98 points to close at 39,816.48, while the broader 50-share NSE Nifty went up by 41.90 points to close at 11,907.50.
Among sectors, the Nifty IT sub-index gained more than a percent while pharma and bank sub-indices faced losses.
Earlier in the morning, markets started on a positive note with Sensex opening above 39,800, more than a 100 points above the previous closing mark.
According to traders, investors are cautious ahead of the Union Budget, scheduled for Friday.
In early session, domestic investors followed cues from other Asian equities which turned volatile amid fears of a global economic slowdown after reports of weakening manufacturing growth from the US, the euro zone, as well as India.
Shanghai Composite Index, Hang Seng, Nikkei and Kospi were trading on a mixed note in their respective early sessions. Bourses on Wall Street ended significantly higher on Monday.
The global oil benchmark Brent crude futures were trading 0.20 per cent lower at 64.93 per barrel.
On the currency front, the Indian rupee depreciated 9 paise to 69.03 against the US dollar.
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