The Sensex closed at 17,418 up 19 points and the Nifty added eight points at 5,287 (provisional).
(Uodated at 14:16 hrs)
Benchmark shares indices were trading flat after most of the gains in financials and telecom shares were erased by losses in FMCG and IT stocks.
At 2:14PM the Sensex was up 10 points at 17,409 and the Nifty was up 4 points at 5,282.
The broader markets outperformed the benchmarks with the BSE midcap and smallcap indices up over 0.5% each.
All the Asian markets were trading in the green on hopes of a stimulus from the Federal Reserve. Hang Seng was the top gainer in the region with Japan's Nikkei ending up 0.7% at 9,067.
European shares joined a global rally in stocks on Tuesday as expectations rose that major central banks will take more policy action to support the world economy, after factory data showed the negative impact of the euro zone debt crisis.
Back home, among the sectoral indices, Consumer Durables, Realty and Bankex indices were the top gainers, up 0.6-2% each. Meanwhile, IT and FMCG indices remained in the negative territory, down 0.8% each.
In the financial space, mortgage lender HDFC was up 1.6% at Rs 672 while ICICI Bank was up nearly 1% each while SBI was up 0.3%.
Telecom stocks gained after The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on Tuesday gave a split verdict on a challenge by mobile phone operators seeking to overturn a government order requiring them to stop offering 3G services beyond their licensed zones through mutual roaming pacts, lawyers said.Bharti Airtel was the top Sensex gainer up 3% at Rs 319. Idea Cellular was up 4.4% and Reliance Comm was up nearly 2%.
IT index was down 0.8% as rupee rose to its strongest level in nearly a month against the Dollar. TCS down 2% and Infosys down 0.4% were the major losers.
FMCG stocks continue to witness profit booking after recent gains on concerns that weak monsoon so far may give rise to commodity inflation leading to higher input costs thereby hurting margins. HUL and ITC were both down over 1.3% each.
Maruti Suzuki extended gains and was up 1% after the company Monday said it has registered 20% jump in June sales.
Dr Reddy's Labs was up 1% after the compan on MOnday said it has launched generic tablets used for treating post- menopausal osteoporosis in the American market.
Among other stocks, Shipping Corporation of India has rallied 4% at Rs 59.05. “The company will increase the freight rate by $200 per standard container effective from 1 July. The increase will apply to all cargo destined for ports in North Europe, the United Kingdom, the Mediterranean and Black Sea region,” the company said in a press release.
The market breadth was positive as 1527 stocks advanced as against 1,146 declines on the BSE.