The last trading day of the year ended on a promising note as the Sensex bounced by about 158 points to 26,117.54 at the close, led by realty and IT stocks.
But the frontline index was down over 5% from a year ago -- its first annual fall since 2011.
Covering-up of short positions following expiry of December futures and options series made investors more sure-footed, brokers said.
The carry-forward of positions to the January series and widening of bets at several blue-chips by investors amid hopes of better returns in the new year accelerated the gains.
After a higher start at 25,980.86, the 30-share index settled higher by 157.51 points, or 0.61%, at 26,117.54.
The broad-based NSE Nifty rose 50.10 points, or 0.63%, to end at 7,946.35, after shuttling between 7,955.55 and 7,891.15.
The Sensex has lost 1,381.88 points, or 5.02%, in 2015, after gaining nearly 30% in the previous year.
The index had last recorded a yearly loss in 2011 when it fell 24%.
The index, which settled 2015 at 26,117.54, is also sharply down from its life-time high of 30,024.74 it scaled on March 4 this year on a rate cut boost from RBI.
The net FPI inflows this year have slackened to just about USD 3 billion, as against an average of USD 20 billion in each of the last three years.
HDFC took the lead, up 2.39%, followed by GAIL (2.18%), Coal India (2.06 per cent) and Bharti Airtel (2%).
HDFC Bank, RIL, Maruti Suzuki, TCS, M&M, Tata Steel and ITC too chalked up gains.
Axis Bank, Hero MotoCorp, L&T, ICICI Bank, SBI, Dr Reddy’s Tata Motors and Cipla fell though.
The Nifty has dropped 336.35 points, or 4.06% -- also its first on-year drop since 2011. The 50-share index had climbed to its life-time high of 9,119.20 on March 4 and plunged to hit year’s low of 7,539.50 on September 8.
For the whole of 2015, the rupee, at 66.18 (intra-day), lost ground against the dollar as it weakened almost 5%.
Foreign portfolio investors (FPIs) net bought shares worth Rs 152.20 crore on Wednesday, provisional data showed.
Sectorally, the BSE realty index on Thursday gained 1.52%, followed by technology (1.18%), IT (1.09%), metal (0.81%), oil and gas (0.73%) and power (0.72%).
Broader markets too displayed a firm trend, with the BSE small-cap index gaining 0.49% and mid-cap index 0.35%.
Globally, the trend in Asia was mixed and that of Europe was down in early trade.