The BSE Sensex rose slightly on Tuesday, rebounding from four-month lows and ending a seven-session losing streak as defensive stocks such as ITC rose amid continued concerns about political stability and the outlook for interest rate cuts.
Gains also tracked steadier global shares on Tuesday, as some buyers took advantage of a recent drop in prices despite fears that Cyprus's raid on bank deposits could become the template for future euro zone bailouts.
However, blue chips such as Reliance Industries extended falls as the outlook for domestic shares continued to be weakened by worries that more key allies could withdraw from the ruling coalition and after the Reserve Bank of India last week issued a cautious statement on monetary policy.
A redeeming factor has been that foreign institutional investors have bought a net $531 million in equities during the previous seven losing sessions, bringing inflows to $10.05 billion so far this year, according to regulatory data.
"Recent correction in the markets has brought valuations to reasonable levels, but the outlook still remains hazy because there is a lot of uncertainty on the global and domestic front," said Kaushik Dani, fund manager at Peerless Mutual Fund.
0.12 percent, or 23.11 points, to end at 18,704.53, rebounding after hitting its lowest close since November 26, 2012 on Monday.
The broader Nifty rose 0.14 percent, or 7.75 points, to end at 5,641.60, after briefly breaking below its 200-day moving average earlier.
Markets will be closed on Wednesday and Friday for public holidays, which could add to the expected volatility on Thursday when monthly derivatives expire at the end of the session.
Gains in defensive stocks pushed indexes higher. ITC rose 1.3 percent, while Hindustan Unilever added 2.5 percent.
Tata Consultancy Services rose 0.8 percent, marking a second day of gains after company said in a statement on Monday that Norway Post selected it for a six-year contract without specifying the value.
Shares in Wockhardt Ltd gained 1.6 percent to after Bank of America-Merrill Lynch initiated coverage of the drug maker with a "buy" rating, citing positive factors such as a "likely" exit from a debt restructuring process and improved cash flows.
However, other blue chips extended falls. Reliance Industries fell 3.2 percent, marking a cumulative decline of almost 4 percent for the month, while Larsen & Toubro ended 2.1 percent lower, giving up all the gains from earlier in March.
Shares in Jet Airways India fell 1.7 percent and SpiceJet Ltd shares dropped 4 percent after India's Foreign Investment Promotion Board (FIPB) approves AirAsia Bhd's proposal to set up a joint venture in India, raising concerns about increased competition.
Shares in Indian Overseas Bank Ltd (IOB), Syndicate Bank Ltd and Oriental Bank of Commerce Ltd (OBC) fell after Moody's Investors Service on Monday downgraded its standalone bank financial strength ratings (BFSR) for the three public sector banks.
IOB shares fall 2 percent, Syndicate Bank dropped 4.4 percent, while OBC ended 0.6 percent lower.