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Benchmark indices are trading firm with both Sensex and Nifty hitting 3-weeks high led by financials and capital goods shares.
By 10:00, the Sensex was higher by 156 points at 21,297 mark and the Nifty gained by 45 points at 6,346 levels.
China's factory activity expanded at the slowest pace in three months in December, weighed down by shrinking export orders, a private survey showed on Thursday, consistent with views the economy's growth rate has moderated into the end of the year.
The final HSBC/Markit manufacturing Purchasing Managers' Index (PMI) slipped to 50.5 in December from 50.8 in November, unchanged from a preliminary reading.
Foreign institutional investors (FIIs) bought shares worth a net Rs 10.16 crore on Wednesday, 1 January 2014, as per provisional data from the stock exchanges.
Asian markets got the New Year off to a sluggish start as Chinese economic data disappointed ahead of a raft of reports on global manufacturing due out through the session. The early action was in currencies, where the yen resumed its long decline as investors used it to fund purchases of higher-yielding assets abroad.
Japan's Nikkei was closed on Thursday but ended 2013 with an annual gain of 57%. Many analysts look for a further advance this year as the Bank of Japan remains committed to its massive stimulus campaign.
The US stock market was closed on Wednesday for New Year's Day holiday.
Back home, BSE Bankex, Capital Goods, Realty, Power, Oil & Gas and Consumer Durables indices have gained by 1% each. Infact, all the major BSE sectoral indices are trading in green zone.
The main gainers on the Sensex at this hour include HDFC, Axis Bank, ICICI Bank, GAIL, ONGC, Sesa Sterlite, Hindalco, BHEL and SBI.
Shares of three PSU OMCs rose by 0.94% to 1.15% after media reports suggested that the price of aviation turbine fuel was hiked by 2.7% on Wednesday.
HPCL, BPCL and Indian Oil Corporation are up by 1% each.
The broader markets are performing well in line with the benchmark indices- BSE Midcap and Smallcap indices are up by nearly 1% each.
The market breadth in BSE remains positive with 956 shares advancing and 237 shares declining.
