The benchmark indices ended the first session of the week with marginal gains after European finance ministers authorized a loan payout to Greece and US manufacturing accelerated in June.
The Sensex ended at 18,814, higher by 52 points and the Nifty ended at 5650, up 23 points.
The midcap index ended at 6974, higher by 70 points and the smallcap index shut shop at 8318, up 93 points.
The markets had started the day with a bang in the wake of firm global cues, with the BSE benchmark gaining nearly 200 points and the Nifty testing the crucial 5,700 mark at opening bell.
The Asian bourses were going strong; Hang Seng, Nikkei and Shanghai were up more than 1% each.
The ministers had agreed over the weekend to provide a loan of 8.7 billion euros ($12.7 billion) to Greece under last year's 110 billion-euro bailout by July 15 after the Greek parliament passed a legislation enabling tax increases, spending cuts and privatisations as part of the required austerity package.
And in the US, the Institute for Supply Management's factory index climbed to 55.3 last month from 53.5 in May, the first gain in four months.
While the markets did surrender a part of their gains in the early part of trade itself, they still managed to close on a confident footing in the wake of continued stability on the global front.
Shanghai stocks hit a six-week high after data last week showed Chinese manufacturing growth moderated in June.
Markets in Hong Kong and Japan also closed higher in the region of 1-2% each.
And the European indices, including the FTSE, CAC and DAX were flat in mid-day trades.
It may be recollected that the Nifty had rallied from lows of 5,250 and sailed past 5,600 in six trading sessions till last Thursday.
Going forward, the monsoons and first quarter earnings will determine the future course of the markets.
HDFC unveils its first quarter results on July 8 and Infosys will declare its numbers on July 12.
Reliance Infra soared by 6.8% at Rs 578
DLF jumped 6%, extending its rally for the second straight day, on reports that it plans to sell its shareholding in two IT special economic zones in Pune and Noida for Rs 1300 crore (Rs 13 billion).
Other realty stocks also followed suit; Unitech soared by 3% at Rs 33 and IRB Infra gained 3% at Rs 179.
Index heavyweight RIL rose 0.7% to Rs 868 on reports its retail subsidiary Reliance Retail has appointed two former Wal-Mart executives to run the operations ahead of the expected foreign direct investment in the retail sector.
The stock had tumbled nearly 4% on Friday after the CBI reportedly searched the house of V.K. Sibal, the former chief of the Directorate General of Hydrocarbons, the upstream regulator, after the state auditor said there may have been inflated costs for some of Reliance Industries' exploration activities.
ICICI Bank edged higher by 0.4% at Rs 1099 after raising its benchmark base by 25 basis points to 9.5% per year.
The stock has thus gained for nine days at a stretch.
Tea stocks had a good session; Tata Global Beverages, Warrant Tea, Jay Shree Tea, Goodricke Group, Asian Tea, Mcleod Russel and Dhuneri Tea rallied in the region of 3% and 20% each.
Sugar stocks also continued their good run, advancing up to 6% each on the BSE, amid media reports that the government may consider the proposal to decontrol the sector in a few days.
Bajaj Hindusthan surged by 4.1% to touch a high of Rs 74 and Simbhaoli Sugars was up 4.5% at Rs 41.
On the other hand, ITC weakened by 1.3% at Rs 199 to emerge as the top loser on the BSE.
Tata Steel fell by 0.8% at Rs 596 after the stock turned ex-dividend for a dividend of Rs 12 a share for the year ended March 2011. L&T, NTPC and Hero Honda were the other significant losers.
The market breadth was positive. Out of 2964 stocks traded on the BSE, there were 1768 advancing stocks as against 1073 declines.
