After starting the day with a gain of 70 points, the BSE barometer Sensex slipped in the red but soon recovered to end at 20,932.48, up 80.10 points or 0.38 per cent.
Similarly, the National Stock Exchange's wide-based Nifty closed at 6,304.85, up 31.65 points or 0.50 per cent after a choppy trade.
Marketmen said fresh buying in blue-chips aided recovery on the Dalal Street.
"Sensex was back in action with the buying at lower levels and the strong FII interest. The weakness during the afternoon trade was primarily the indicator of profit-booking, Unicon Financial Services CEO Gajendra Nagpal said.
HDFC Bank, Infosys Technologies and ICICI Bank came to the rescue of the market during the fag-end of the session, after witnessing good buying at their counters. FMCG major HUL emerged as the top performer among the blue-chip companies by surging 4.3 per cent to close at Rs 318.90.
Among the BSE 13 sectoral indices FMCG was the top gainer which soared 93.36 points to finish at 3,793.28, boosted by gain in another heavyweight ITC, which went up 1.34 per cent.
HDFC Bank ended the day 2.42 per cent higher, becoming the second biggest gainer in the Sensex. Country's top private sector lender ICICI Bank too rose 1.11 per cent.
Meanwhile, state-owned State Bank of India was the biggest laggard for the day, plunging 4.40 per cent, after reporting a 22.2 per cent decline in its second quarter net profit yesterday.
The country's largest lender had posted a 22.2 per cent decline in its consolidated net profit at Rs 2,437.1 crore for the second quarter ended September 30, against Rs 3,133.1 crore in the same period last year.
"SBI had posted lower-than-expected second quarter numbers due to which the stock performed badly today," said an expert.
Reliance Industries, which carries the maximum weightage in the Sensex, also halted its three day rally at the street and fell 1.03 per cent.
Another big attraction on the Dalal Street was the technology and IT counters. Software giant TCS rose 2.25 per cent and the IT bellwether Infosys too inched up 0.94 per cent.
Country's top telco Bharti Airtel also displayed a good show and edged higher by 1.74 per cent, ahead of expectations of handsome second quarter numbers to be announced tomorrow.
Similarly, another telecom giant Reliance Communications ended with a gain of 0.72 per cent.
Analysts maintained the positive outlook on the markets in view of the continued buying interest.
"Sensex must breach its highest level of 21,206.77 this week only as the investor sentiment is positive and the fresh buying from both the FIIs and the retail investors is coming in the market," CNI Research CMD Kishore P Ostwal said.
Among the 30-frontline stocks, 19 ended the day in the positive territory, while 11 ended on a negative note.
Besides, marketmen also expect that PowerGrid Corporation's follow-on-public offer, which has received smart response from the investors on first day of subscription, would fuel the rally.
"Power Grid FPO is likely to get oversubscribed and should see a smart premium on listing, thereby giving boost to the markets," Ostwal added.
On the global front, Asian stock markets were weak with China's benchmark Shanghai Index down 0.78 per cent and Japan's Nikkei Index by 0.39 per cent while Europe was trading firm in the afternoon session.