fiscal at 7.81% in September --a development that may restrain RBI from cutting rates.
"Headline WPI inflation of 7.81% is unlikely to lead to the RBI starting to reduce repo rates on October 30," said Indranil Pan, Chief Economist, Kotak Mahindra Bank.
However, with the European markets opening strong, buying activity resumed on persistent capital inflows.
The BSE benchmark index closed up by 38.37 points, or 0.21%, at 18,713.55, on buying in FMCG, refinery and realty sectors. Hindalco, Cipla, Dr Reddy and Tata Power were among the best performers in Sensex.
Brokers said trading sentiment firmed up on hopes of better earnings on Monday by RIL. "After the initial weakness, the markets did get some wings to rise. RIL did its part to support the rise, ahead of its quarterly results," said Milan Bavishi, Head Research, Inventure Growth & Securities.
Shares of RIL closed 0.54% higher. In 30-share Sensex, overall 18 stocks climbed led by stocks of FMCG and Oil and Gas. However, Maruti, Sterlite and CIL led 12 losers.
The 50-share NSE index Nifty rose by 11.20 points, or 0.20% to 5,687.25, after touching day's low of 5,651.05.
Most Asian stocks ended lower with concerns about Europe keeping investors sidelined amid mixed signals on the state of the Chinese economy.
However, France's CAC, the UK' FTSE and Germany's DAX were up between 0.6-1.3% in afternoon trade.
FIIs pumped in Rs. 201.16 crore last Friday as per provisional data with stock exchanges. Key indices in China, Japan, South Korea and Taiwan declined in the 0.24-0.40% range while indices in Hong Kong, Japan and Singapore rose by 0.06-0.51% range.
European shares that rose in the early trade held on gains even in afternoon as investors digested a raft of data out of China, including better-than-expected export numbers.
On the Indian market's performance, Kishor P Ostwal, CMD, CNI Research Ltd said: "Market, after opening weak, made a come back...inflation was contained irrespective of huge cost hikes across the board in diesel, gas and fares. Nifty futures closed near 5702. Next upside is 5780 and 5830."
Around 18 out of 30 Sensex-based scrips closed with gains while 12 counters finished with losses. Hindalco was the top gainer with a rise of 1.83%, followed by BHEL (1.55%), Cipla (1.44%), Bharti Airtel (1.15%), Tata Power (1.12%), ITC (1.11%), ONGC (0.92%), ICICI Bank (0.74%), HUL (0.72%), SBI (0.61%) and RIL (0.53%).
However, Maruti Suzuki dipped by 2.46%, Infosys by 1.25%, Sterlite Ind by 1.02%, L&T by 0.88% and Coal India by 0.74%.
Among sectoral indices, BSE-FMCG rose by 0.75%, followed by BSE-Oil&Gas (0.53%) and BSE-Realty (0.52%), while BSE-CD declined by 0.84 per cent and BSE-IT by 0.76%.
"The Indian economy and the markets are craving for more reforms, especially measures to address fragile fiscal health of the government. RBI may remain reluctant until the Centre comes up with a credible and workable plan to slash the budget shortfall," said Amar Ambani, Head of Research, IIFL.
Total market breadth was slightly positive as 1,494 stocks ended higher while 1,353 scrips settled in the red.
The total turnover dropped sharply to Rs. 1,830.52 crore from Rs. 2,742.56 crore last Friday.