Traders say markets are now awaiting fresh impetus from the government as it tries to contain the ballooning fiscal deficit and meet its disinvestment target.
Fitch Ratings reiterated on Tuesday its 'negative' outlook on India's sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.
Broader earnings outcome of blue chip companies such as Infosys on Friday and Tata Consultancy Services on Monday will set the tone in the coming weeks. Analysts will watch management commentary for direction on the technology sector.
"Third-quarter earnings would be a key focus in the near term, but I don't expect earnings to give material positives," said Vijay Kedia, director at private wealth management firm Kedia Securities.
The impact of government policies would be felt only after a few months, Kedia added.
The BSE Sensex rose 0.26 percent, or 51.10 points, to end at 19,742.52.
The broader Nifty ended 0.22 percent higher, or 13.30 points, at 6,001.70.
Defensive stocks led the gainers on value buying, with cigarette-maker ITC Ltd
Shares of education services provider Educomp Solutions
State Bank of India shares ended up 1.04 percent.
The investment bank said the upgrades came on the back of a steepening bond yield curve in anticipation of rate cuts by India's central bank, stronger-than-expected loan recoveries, and reduced quality pressures.
Among decliners, shares of Larsen & Toubro Ltd
Citi downgraded L&T to 'neutral' from 'buy' and cut its target price to 1,732 rupees from 1,855 rupees, citing cancellations in the second quarter of fiscal 2013, slow-moving orders, as well as a weaker domestic economic growth.
Oil companies fell on profit-taking after a recent rally, with Hindustan Petroleum Corp
Infosys was trading at a 36 percent discount to its 10-year median P/E, the widest gap among large-cap Indian technology stocks, according to Thomson Reuters' StarMine estimates.