Stocks made modest gains on Tuesday propped by auto stocks and a small recovery in banking shares, while the year-end holiday season and caution ahead of the derivatives contracts expiry on Thursday kept participation low.
The Sensex had closed at its highest level in nearly four weeks on Monday led by renewed buying in financial and pharma stocks.
However, volumes are expected to be thin this week with a majority of foreign institutional investors on holiday.
Sentiment was muted on the back of weak crude oil prices and caution ahead of the futures and options contracts expiry on Thursday.
"It all depends on further movements in oil and metal prices. If they stabilise, it will be a boost. If they fall, then there can be some correction," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm
The Sensex rose 45.35 points or 0.17 per cent at 26,079.48. The NSE Nifty finished 3.80 points or 0.05 per cent higher at 7,928.95. Of the Nifty 50 stocks, 24 advanced, 25 declined and 1 remained unchanged.
IT and financials were the biggest drag on the index while auto stocks provided some support.
Infosys was down 0.16 per cent, HCL Tech fell 1.75 per cent and Tata Consultancy eased 0.5 per cent, the biggest drags on the NSE index.
Mahindra & Mahindra gained 1.26 per cent while Bajaj Auto rose 1.7 per cent ahead of their monthly auto sales numbers this week.
Meanwhile, United Breweries fell over 0.93 per cent while United Spirits slipped over 2.8 per cent after the country's top court upheld the Kerala High Court's alcohol ban order.
The 30-share barometer had rallied 195.42 points in the previous session.
Global markets
European shares climbed higher on Tuesday, lifted by firmer financial stocks.
The pan-European FTSEurofirst 300 index rose 0.6 per cent while the euro zone's blue-chip Euro STOXX 50 index advanced 0.9 per cent.
Deutsche Bank rose 1.2 per cent following its move to sell its 20 percent stake in China's Hua Xia Bank to insurer PICC Property and Casualty Co for up to 25.7 billion yuan.
Asian stocks poked into positive territory on Tuesday, shrugging off early losses as Chinese shares rose a day after marking their biggest loss in a month and crude prices took back some lost ground.