The key benchmark index ended 63 points higher at 9,647 amid choppy trade as investors awaited details of the US stimulus and financial rescue plans. There are also hopes of the Indian government providing more sops to boost growth in its interim budget.
The Nifty also surged 0.5 per cent to 2,934.
“Going by the current trends, 3050 appears possible on the Nifty. PSU banks are clear underperformers in the broad markets and oil & gas stocks led by RIL have outperformed the markets,” said investment consultant Devang Visaria.
While realty, capital goods, banking and auto stocks rallied, metals and FMCG counters were the key draggers.
The realty index on the BSE rose 6.6 per cent led by strong buying activity in Unitech and DLF. Both stocks jumped more than 9 per cent each.
The BSE capital goods index also advanced 3.1 per cent and Praj Industries, Bharat Earth Movers and Gammon India were the biggest gainers in the pack.
Snapping a four-day rally, the BSE metal index ended 1.4 per cent lower. Sail, Ispat Industries and Hindustan Zinc were the major losers in the group, down more than 2 per cent each.
Among the Sensex scrips, DLF, Bhel and L&T were the top gainers. Reliance Infrastructure, Hindalco and Tata Motors were the biggest losers in the pack.
In the broader markets, the BSE small cap index surged 0.3 per cent and the CNX mid cap index closed 1.6 per cent higher.
Asian stock markets were mostly lower in erratic trade today, as investors awaited details of massive U.S. spending plans to revive the world's largest economy and bolster its troubled financial industry. European markets dropped in early trade.
Asian markets fluctuated throughout the day after rising last week on hopes the U.S. stimulus measures will speed recovery in its recession-hit economy. An $838 billion economic bill survived a key test vote in the Senate Monday, setting up a final vote Tuesday. The plan must then be reconciled with an $819 billion version from the House of Representatives.
After Wall Street closed Monday, President Barack Obama pressed his case for the stimulus plan, warning that failing to act swiftly and boldly "could turn a crisis into a catastrophe."
Investors also are eyeing Obama administration plans to retool the government's $700 billion program to bail out financial companies reeling from bad assets. Later Tuesday, Treasury Secretary Timothy Geithner is to unveil new rules for the program, which has been heavily criticized for doling out hundreds of billions of dollars to banks with few conditions on how the money is spent.
"People are waiting to see what happens in the U.S.," said Conita Hung, head of equity markets with Delta Asia Financial Group in Hong Kong. "People aren't going to inject a lot more money in the market with this kind of uncertainty."
As trading opened in Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 all fell more than 1 percent. The downward lurch came as Swiss bank UBS AG announced it lost 8.1 billion Swiss francs ($7.57 billion) in the fourth quarter and said it would cut a another 2,000 jobs as it refocuses on its home market after a troubled year abroad.
Wall Street futures pointed to a lower open in the U.S. Dow futures were down 88 points, or 1.1 percent, at 8,130 and S&P500 futures were down 10.10, or 1.2 percent, at 855.
Earlier in Asia, Japan's Nikkei 225 stock average fell 23.09 points, or 0.3 percent, to 7,945.94, while South Korea's Kospi shed 3.82 points, or 0.3 percent, at 1,198.87. Benchmarks in Australia, New Zealand, the Philippines and Thailand also fell.
In Hong Kong, the Hang Seng closed up 0.8 percent at 13,880.64 after swinging in and out of negative territory throughout the session. Markets in Taiwan and Singapore also rose.
In mainland China, Shanghai's key index — which had surged about 12 percent over the last six trading days — rebounded from the red to finish 1.8 percent higher.
