Indian shares rose for a second consecutive session on Wednesday, led by Larsen & Toubro Ltd on upbeat quarterly results while positive global cues helped boost investor sentiment.
Asian stocks bounced to one-week highs after Wall Street saw a second consecutive record-breaking session on Tuesday.
A positive finish on Wednesday would mark the first back-to-back gain for Indian stock markets since Prime Minister Narendra Modi's government withdrew high-value currency notes from the market on Nov.8 in an effort to crack whip on black money circulation.
But traders said they still expected sentiment to remain weak given continued worries about the economic impact from Modi's action, with volatility expected ahead of the expiry of derivatives on Thursday.
"The rollover ahead of the expiry is 30 percent as of now, which is significantly lower than the 50-60 percent levels seen in the last three months," said Anand James, chief market strategist, Geojit BNP Paribas Financial Services Ltd.
"Tuesday's gains aren't enough to start a vertical recovery in the market as investors have begun looking for an exit route."
The broader Nifty was up 0.07 percent at 8,007.95 as of 0704 GMT, while the benchmark Sensex was 0.07 percent higher at 25,980.07.
Engineering firm Larsen & Toubro rose as much as 4.2 percent, making it one of the top three gainers on the NSE index. L&T reported an 84 percent jump in its second-quarter net profit at 14.35 billion rupees ($209.69 million), beating analysts' average expectation of 8.55 billion rupees.
Among other gainers, some exporters rose after the rupee fell to as low as 68.52 per dollar, the weakest since late February, tracking a decline in emerging-market currencies.
Pharmaceutical company Cadila Healthcare Ltd gained as much as 2.7 percent, while Tata Consultancy Services Ltd was up about 1 percent.
($1 = 68.4329 rupees)