The benchmark indices ended on a strong note on Tuesday, amid positive global cues, led by heavyweights such as Infosys, HUL and HDFC. The Nifty closed above its crucial psychological levels of 5,400 up 55 points to close at 5,421 and the Sensex advanced 194 points to close at 17,885.
European shares and the euro edged higher on Tuesday on optimism that meetings on Greece's future and a strategy being drawn up by the European Central Bank will lead to progress in solving the euro zone debt crisis.
The CAC40 index advanced 0.7 per cent to 3,504, DAX moved higher by 0.3 per cent to 7,053 and the FTSE100 was up 0.3 per cent at 5,839.
The Asian markets closed on a mixed note on expectations that the ECB would take bold action to tackle the euro zone sovereign debt crisis. The Shanghai Composite ended higher by 0.5 per cent at 2,118, Taiwan Weighted advanced 1 per cent to 7,507 while, the Nikkei slipped 0.1 per cent.
Back home, the government announced that the July CPI stands at 9.86 per cent y-o-y. The country's annual consumer price inflation slowed slightly in July helped by a drop in petrol prices at the pump, government data showed on Tuesday, but a drought in parts of the country pushed food prices higher.
Index heavyweight Infosys advanced 2.4 per cent to close at Rs 2,407 after the company won a harassment case filed by its employee Jack Palmer, after a US Judge dismissed his claims and threw out the case on Monday.
Sterlite Industries, NTPC, HDFC, GAIL India, Tata Power, HUL, Mahindra& Mahindra, ONGC, TCS, Cipla, ICICI Bank, BHEL and Larsen & Toubro also ended higher by 1-4.5 per cent each.
On the other hand, Hindalco was the top loser from the Sensex pack. It slipped 1.4 per cent to close at Rs 112 on reports that the Odisha State Pollution Control Board (OPSCB) has asked the company to shut down the captive power plant (CCP) of smelter plant near Hirakud in western Odisha in the wake of a breach in the company's ash pond that damaged standing crops in the locality.
Bharti Airtel also slipped 1.3 per cent to close at Rs 258 after Morgan Stanley downgraded it to "equal-weight" from "overweight" and cut its target price to Rs 280 from Rs 366.
Dr Reddy's Labs, Tata Steel, Hero MotoCorp, ITC and Reliance Industries also edged lower in trades on Tuesday.
The BSE IT index was the top sectoral gainer, up 0.75 per cent or 98 points to close at 5,710. Power, realty, auto, metal, PSU, capital goods, FMCG and bankex indices were also among the gainers.
Shares of tyre manufacturers are trading higher up to 12 per cent after the natural rubber prices hit twenty-three month low, which may boost profitability of tyre companies.
Shares of companies engaged in retail business are in limelight on the bourses in late noon trades on reports that the Economic Advisory Council on August 17, said to the prime minister that India should allow foreign retailers to own as much as 49 per cent of multi-brand retail chains to attract investment and boost economic growth.
Bilcare has soared 19 per cent to Rs 175 after the company said it has signed an agreement with United Drug plc for the sale of its global clinical supplies (GCS) businesses in the US and the UK for $61 million (approx Rs 340 crore).
The broader markets ended flat. The BSE mid-cap index advanced 0.2 per cent to close at 6,173 and the small-cap index added 0.5 per cent to close at 6,650.
The overall breadth was positive as neutral as 1,504 stocks advanced while 1,355 declined.