The benchmark Sensex partially erased initial gains from the RBI's surprise reduction of a bank lending rate and climbed 89 points on Tuesday to end at the highest level in more than two weeks.
Brokers said sentiment initially turned buoyant after the Reserve Bank of India yesterday cut the marginal standing facility (MSF) rate, at which it lends emergency funds to banks, by 50 basis points to 9 per cent ahead of the festive season with the aim of improving liquidity and boosting economic activities.
The index regained the 20,000 level but failed to hold on to the gains. Realty, capital goods and FMCG sector stocks gained, while metal and IT stocks declined.
ITC and ICICI Bank boosted the Sensex, while TCS and HDFC dragged it lower. The major gainers on the index included Tata Power and Bharti Airtel.
The 30-share Sensex resumed above the 20K-level and touched an intra-day high of 20,150.27, before succumbing to profit-booking to settle at 19,983.61, a rise of 88.51 points or 0.44 per cent.
This is the highest closing level for the index since September 20, when it ended at 20,263.71.
"While the markets had a flying start on back of MSF cut by RBI, the gains got trimmed during the day. The market movement has actually turned sideways ahead of result season," said Milan Bavishi, Head Research at Inventure Growth and Securities.
The 50-share CNX Nifty on the National Stock Exchange rose 22.25 points, or 0.38 per cent, to 5,928.40. The SX40 index on the MCX Stock Exchange gained 48.17 points to end at 11,904.62.
The RBI had taken steps in mid July, including raising the MSF rate to 10.25 per cent, to tighten liquidity in an attempt to curb volatility in the rupee-dollar exchange rate.
Continued capital inflows also boosted sentiment, with overseas investors having bought a net Rs 494.13 crore of shares on Monday, according to provisional stock exchange data.