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Benchmark indices are trading firm with both Sensex and Nifty hitting 3-weeks high led by financials shares.
Factory growth lost momentum last month as softness in new domestic orders prompted firms to lower production growth, but demand from abroad picked up, a survey showed on Thursday.
The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, fell to 50.7 in December from 51.3 in the previous month.
The index, which gauges business activity in manufacturing was below the 50 mark for three months signalling contraction before rising above it in November.
The latest PMI showed inflationary pressures, which started to ease in November after a pick up in the previous few months, remained steady.
At 11:38am, the Sensex was higher by 148 points at 21,288 mark and the Nifty gained by 44 points at 6,346 levels.
The rupee was trading strong in morning trades due to dollar sale by exporters. At 10:45 am, the rupee was trading at Rs 61.84 compared with previous close of Rs 61.91 per dollar. The bullish stock markets are also helping the rupee. Currency dealers see the rupee appreciating further during the day.
Foreign institutional investors (FIIs) bought shares worth a net Rs 10.16 crore on Wednesday, 1 January 2014, as per provisional data from the stock exchanges.
Asian markets got the New Year off to a sluggish start as Chinese economic data disappointed ahead of a raft of reports on global manufacturing due out through the session. The early action was in currencies, where the yen resumed its long decline as investors used it to fund purchases of higher-yielding assets abroad.
Japan's Nikkei was closed on Thursday but ended 2013 with an annual gain of 57%. Many analysts look for a further advance this year as the Bank of Japan remains committed to its massive stimulus campaign.
The US stock market was closed on Wednesday for New Year's Day holiday.
Back home, BSE Consumer Durables and Bankex are up over 1.5%, Capital Goods, Healthcare, IT and TECk indices are other major gainers on the BSE sectoral indices. All major sectoral indices on BSE are trading in the green zone.
Banking shares both public as well as private sectors are in focus trading higher by up to 6% on the National Stock Exchange (NSE).
Allahabad Bank, Syndicate Bank, Andhra Bank, Karnataka Bank, Union Bank of India, Federal Bank, Bank of India and Corporation Bank are trading higher by over 3% each, while Axis Bank, Punjab National Bank, IndusInd Bank, Yes Bank, ICICI Bank and HDFC Bank are up 2-3%.
The main gainers on the Sensex at this hour include Maruti Suzuki, Sun Pharma, Axis bank up over 2%, SBI,HDFC, Gail India, ICICI Bank, HDFC Bank are up over between 1-1.5%, TCS, Infosys and Reliance are other top gainers.
Shares of three PSU OMCs rose by 0.94% to 1.15% after media reports suggested that the price of aviation turbine fuel was hiked by 2.7% on Wednesday.
HPCL, BPCL and Indian Oil Corporation are up by 1% each.
The broader markets are performing well in line with the benchmark indices- BSE Midcap and Smallcap indices are up by nearly 1% each.
The market breadth in BSE remains positive with 956 shares advancing and 237 shares declining.
