Eight of the 12 sectoral indices on the BSE rose, led by healthcare and auto stocks.
The 30-share S&P BSE Sensex opened higher on the back of firm Asian cues following a strong closing on Wall Street yesterday after the US trade deficit fell to its lowest level in four years in November, supporting the view that the outlook for the US economy is improving.
The index moved in a 98-point range before falling on profit booking at the fag end and ended at 20,729.38, a rise of 36.14 points or 0.17 per cent. It was the first gain for the Sensex in six sessions.
The broader, 50-share CNX Nifty on the National Stock Exchange added 12.35 points, or 0.20 per cent, to 6,174.60.
"Positivity in the markets was seen in a few Sensex stocks, primarily led by Coal India, which saw a movement of about 5 per cent on anticipation of interim dividend. Rupee too made some positive strides today, which helped the equity markets to maintain a positive momentum," said Jignesh Chaudhary, Head of Research at Veracity Broking Services.
The US Labor Department will release non-farm jobs data for December on Friday morning, giving investors an indication of how the world's largest economy is faring.
Minutes from the December 18 meeting of the Federal Open Market Committee are scheduled for release later today. The minutes are expected to provide more insights into the Fed's decision to reduce its monthly bond purchases by USD 10 billion.
Most Asian stocks ended higher after the International Monetary Fund said it would raise its estimate for global economic growth and the US trade deficit narrowed.
Key indices in Taiwan, Hong Kong, Singapore and Japan rose, while indices in China and South Korea fell. In Europe, indices in France, Germany and UK were lower.
Foreign institutional investors continued their selling spree and sold local shares worth a net Rs 567.02 crore, according to provisional stock exchange data.
In the domestic market, 15 Sensex shares rose, led by Coal India 4.77 pc, Cipla 3.38 pc, GAIL India 2.49 pc, Tata Power 1.82 pc and Dr Reddy's Lab 1.62 pc.
Larsen & Toubro dropped 2.03 pc, followed by Axis Bank 1.74 pc, Sesa Sterlite 1.67 pc, BHEL 1.33 pc and ONGC 1.09 pc.
Among the S&P BSE sectoral indices, Healthcare rose 1.04 pc and Auto 0.71 pc, while Capital Goods dropped 1.35 pc and Consumer Durables 0.58 pc.
The market breadth remained positive as 1,503 stocks gained and 1,072 fell. Total turnover was almost stable at Rs 2,353.84 crore.