Consequently, the key indices closed on a flat-to-positive note, even as profit booking, disappointing quarterly results and negative global cues kept the equity markets subdued throughout the day's trade.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) inched up by 19.85 points, or 0.23 per cent, to 8,528.55 points.
The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 27,790.05 points, closed at 27,787.62 points -- up 40.96 points or 0.15 per cent from the previous close at 27,746.66 points.
It touched a high of 27,826.69 points and a low of 27,637.98 points during the intra-day trade.
The BSE market breadth was tilted in favour of the bears -- with 1,476 declines and 1,194 advances.
On Monday, the benchmark indices closed in the red led by gloomy quarterly results and profit booking. The barometer index was down by 90 points, or 0.32 per cent, while the Nifty edged down by 33 points or 0.38 per cent.
Initially on Tuesday, the benchmark indices opened on a flat note, in sync with their Asian peers.
The equity markets rose on the back of the government's decision to infuse capital into public sector banks.
In a statement, the Ministry of Finance announced a capital infusion of Rs 22,915 crore towards the recapitalisation of 13 public sector banks during 2016-17.
Besides, investors' sentiments were buoyed after global credit rating agency Fitch Ratings on Monday affirmed India's long term foreign and local currency issuer default ratings (IDR) at "BBB-".
The rating agency also maintained India's outlook on the long term IDRs as stable.
However, the key indices ceded their gains, as profit booking, disappointing quarterly results and weak global crude oil prices hampered the upward trajectory.
In addition, reduced chances of further monetary policy easing by the European Central Bank (ECB) in its upcoming monetary policy review dampened investors' sentiments.
Nevertheless, value buying, healthy progress of monsoon season and expectations of GST (Goods and Services Tax) getting passed supported prices at the lower levels.
The Indian rupee also strengthened. It gained by nine paise to 67.11 against a US dollar from its previous close of 67.20 to a greenback.
"Quarterly results till now have not given any incentive to chase prices higher. There was some profit booking as well that hampered markets upward movement. European markets, too, remained weak ahead of ECB meet," Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.
Vaibhav Agrawal, Vice President and Research Head at Angel Broking elaborated that Indian indices reacted positively to the government's decision to recapitalise PSU banks.
"Indian indices closed mildly positive after two days of declines. The market reacted positively to the news of the government's plan to recapitalise PSU banks," Agrawal said.
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, Nifty traded with bearish sentiments during the first half of the session but later recovered due to fresh buying support at lower levels.
"Over all it was a volatile session for Nifty. Bank Nifty also witnessed volatile sentiments on profit booking at higher levels. Most IT and banking sector stocks witnessed smart recovery from lower levels due to buying support," Desai said.
In terms of investments, provisional data with the exchanges showed that foreign institutional investors (FIIs) bought stocks worth Rs 548.90 crore, while the domestic institutional investors (DIIs) divested scrips worth Rs 377.43 crore.
Sector-wise, the S&P BSE oil and gas index surged by 190.07 points, followed by the healthcare index, which increased by 76.63 points, and the automobile index rose by 70.23 points.
On the other hand, the S&P BSE fast moving consumer goods (FMCG) index declined by 53.16 points, followed by the consumer durables index, which fell by 35.51 points, and the banking index slipped by 33.22 points.
Major Sensex gainers during Tuesday's trade were: ICICI Bank, up 2.11 per cent at Rs 269.15; PowerGrid, up 1.90 per cent at Rs 166.45; Lupin, up 1.52 per cent at Rs 1,690.40; Tata Steel, up 1.27 per cent at Rs 370.25; and Tata Consultancy Services (TCS), up 1.15 per cent at Rs 2,461.55.
Major Sensex losers were: Hindustan Unilever (HUL), down 2.75 per cent at Rs 895.15; Axis Bank, down 1.06 per cent at Rs 564; HDFC Bank, down 1.03 per cent at Rs 1,218.05; Mahindra and Mahindra (M&M), down 0.84 per cent at Rs 1,454.80; and Coal India, down 0.81 per cent at Rs 318.95.
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