The gains mark a recovery from an eight-session losing streak that had sent the benchmark BSE Sensex to its lowest level since December 31, 2012.
Still, caution remains, with attention shifting to January wholesale price data tomorrow, after the Reserve Bank of India (RBI) sparked concerns about future interest rate cuts with a cautious statement on monetary policy last month.
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Although the wholesale inflation index is expected to ease to a three-year low of seven per cent, that would still remain well above the RBI's perceived comfort zone of around five per cent.
Markets could also be range-bound ahead of the 2013-14 Budget, to be unveiled on February 28, which will be critical in determining the government's fiscal discipline.
"I think inflation data will be important, but the relevance of it may be overshadowed by expectations ahead of the budget," said Jagannadham Thunuguntla, Head of Research, SMC Investments and Advisors Limited.
The RBI will not just take WPI inflation, but will also consider other factors in its March meeting, added Thunuguntla.
The BSE Sensex rose 0.24 per cent, or 47.04 points, to end at 19,608.08, marking its highest close in a week.
The broader Nifty rose 0.18 per cent, or 10.45 points, to end at 5,932.95, closing above the psychologically important 5,900 level for a second day.
Tata Consultancy Services Ltd rose 1.8 per cent, after earlier hitting a record high of Rs 1,441.65, on hopes earnings will improve in the fiscal year starting in April on the back of an improving global economy.
The gains come a day after industry body, National Association of Software and Services Companies (Nasscom), forecast exports from the software services sector will grow 12-14 per cent in 2013-14 to as much as $87 billion.
Other software services exporters also gained. Infosys Ltd shares rose 1.2 per cent, while HCL Technologies Ltd ended up 4.6 per cent.
Shares in Tata Motors gained 2.1 per cent after luxury unit Jaguar Land Rover (JLR) posted a surge in both wholesale and retail sales last month.
Oil and Natural Gas Corp gained 1.1 per cent, clocking a second day of gains after quarterly earnings beat estimates on Monday.
Shares in Motherson Sumi Systems Ltd surged 6.7 per cent, a day after posting a recovery in quarterly earnings and ahead of a planned stake sale that traders say could happen at a premium.
Among decliners, State Bank of India fell 1.8 per cent on speculation the country's biggest public sector bank could report higher-than-expected bad loans when it unveils October-December earnings on Thursday.
Shares in Tata Steel Ltd ended 2.3 per cent lower ahead of its December quarter earnings on worries the steel maker would post a net loss.
Kingfisher Airlines ended 5 per cent lower, its maximum daily limit, after lenders said they would initiate recovery proceedings against the carrier.