Equity indices overcame a wobbly start to clock gains for the third session on the trot on Tuesday, propped up by banking, metal and energy stocks amid a mixed trend in global markets.
A recovery in the rupee also bolstered sentiment, traders said.
The 30-share BSE Sensex advanced 246.47 points or 0.45 per cent to settle at 54,767.62 after starting trade on a weak note. In a volatile session, the benchmark hit a high of 54,817.52 and a low of 54,232.82 during the day.
On similar lines, the broader NSE Nifty climbed 62.05 points or 0.38 per cent to close at 16,340.55.
Axis Bank topped the Sensex gainers' chart, spurting 2.35 per cent, followed by IndusInd Bank, Mahindra & Mahindra, Tata Steel, UltraTech Cement, Bajaj Finserv, SBI and Bharti Airtel.
However, Nestle India, HCL Technologies, Sun Pharma, Kotak Mahindra Bank, Dr Reddy's, Infosys and Asian Paints were the biggest laggards, dropping up to 1.37 per cent.
The market breadth was positive, with 19 of the 30 Sensex constituents closing higher.
"Domestic indices witnessed bouts of volatility amid weakness in global markets, IT and pharma sectors. But it was well countered by recovery in banking, auto and metal stocks.
"Developed markets traded negatively due to slow hiring plans announced by blue chip MNCs like Apple Inc in anticipation of global economic slowdown. However, due to the Indian economy's strong fundamentals, we believe that the immediate impact of the slowdown in the domestic economy will be milder than of global peers," said Vinod Nair, Head of Research at Geojit Financial Services.
In the broader market, the BSE smallcap gauge jumped 0.88 per cent and the midcap index climbed 0.68 per cent.
Among BSE sectoral indices, realty jumped 2.66 per cent, followed by bank, auto and basic materials. oil and gas index was the only laggard.
Ajit Mishra, VP - Research, Religare Broking Ltd, said the recent bounce in laggards like IT and metal has eased pressure on domestic markets.
"We maintain our positive yet cautious stance and prefer sectors like auto, FMCG and banking for long opportunities," he added.
World stocks were mixed ahead of this week's policy meetings of key central banks, including the European Central Bank and Bank of Japan.
In Asia, markets in Seoul and Hong Kong ended lower, while Tokyo and Shanghai settled in the green.
Bourses in Europe were trading on a mixed note during mid-session deals. The US markets had ended lower on Monday.
International oil benchmark Brent crude dipped 0.57 per cent to $105.7 per barrel.
The rupee recovered from its all-time low of 80.05 to close 6 paise higher at 79.92 (provisional) against the US dollar on Tuesday, tracking its regional peers and a positive trend in domestic equities.
Foreign institutional investors turned net buyers on Monday, picking up shares worth Rs 156.08 crore, as per exchange data.