The NSE index staged a late rebound on Friday to end at its highest level in nearly two months after public sector banking shares led financials higher, while gains in stocks such as Tata Motors also provided some support.
The broader NSE index ended higher by 16.85 points or 0.21 per cent at 7,963.20, its highest close since November 4.
The benchmark BSE index ended ended higher by 43.36 points or 0.17 per cent at 26,160.90, its highest close since December 1.
Both the NSE and BSE have gained for three consecutive weeks with the NSE rising 1.3 per cent and the BSE gaining 1.25 per cent.
The near-absence of overseas cues meant investors remained directionless despite the beginning of the January monthly derivatives contracts.
Among BSE sectoral indices, realty index gained the most by 1.99 per cent, followed by capital goods 1.01 per cent, auto 0.93 per cent and power 0.89 per cent. Only IT (-0.34 per cent ) and TECk (-0.3 per cent) indices were down.
Top five Sensex gainers were Tata Motors (+2.66%), Adani Ports (+2.65%), Coal India (+1.58%), State Bank of India (+1.45%) and BHEL (+1.03%), while the major losers were GAIL (-1.49%), NTPC (-1.03%), TCS (-0.94%), Tata Steel (-0.87%) and M&M (-0.64%).
IDBI Bank gained 1.12 per cent after the lender got government approval for raising Rs 3,771 crore ($569.6 million) in capital.
Shares that attracted investors in a quiet market, include aviation stocks such as Jet Airways, which rose 8.3 per cent, SpiceJet, up 9.44 per cent, while InterGlobe Aviation was up 8.73 per cent after oil companies cut jet fuel prices by 10 per cent.
Investors back home are now looking towards the second week of January for signs of a recovery in corporate balance sheets when Indian companies report quarterly earnings.
"IT, pharma will do well, private sector banks in the second half of the year will do well and cement will do well on infra spending," Gaurang Shah, vice-president of Geojit BNP Paribas, said while listing his preferred sectors for 2016.
According to provisional data, foreign portfolio investors (FPIs) bought shares worth Rs 1,123.41 crore yesterday.
A report by SMC Global said: "Most Asian markets are closed on account of New Year holiday. US stocks had their worst annual performance since 2008, closing out a rocky year that tempered investors' expectations for gains in 2016. US initial jobless claims climbed to 287,000, an increase of 20,000 from the previous week's unrevised level of 267,000. Economists had expected jobless claims to edge up to 270,000. With the bigger than expected increase, jobless claims rose to their highest level since hitting 296,000 in the week ended July 4th.''