The BSE Sensex was up 0.8 percent on Monday led by financial firms, but trading was choppy a day before the Reserve Bank's monetary policy and mixed Asian markets.
State Bank of India rallied 2.6 percent after the leading lender posted better-than-expected quarterly profit on Saturday and forecast 20-22 percent loan growth in fiscal 2012 due to strong credit demand.
Rival ICICI Bank, due to report earnings later Monday, is set to post a 23 percent rise in quarterly net profit. The stock was up 0.5 percent.
The Reserve Bank of India is expected to raise key rates by 25 basis points at the policy, but a bigger increase to tackle accelerating inflation could crimp economic
growth and dampen investor sentiment.
The market has discounted a 25 basis points rate hike, but is worried it could be a 50 basis point hike, said Ambareesh Baliga, senior vice president at Karvy Stockbroking.
There is fear, nobody expects the market to move up, so more and more people are getting into cash, he said.
By 10:40 a.m. (0510 GMT), the 30-share BSE index was trading up 0.8 percent at 19,161.07 points, with 23 of its components advancing. The index briefly turned negative at one stage.
Shares in Tata Steel rose 1.8 percent after the steelmaker's follow-on share sale received strong response, getting subscriptions six times the shares on offer.
Index heavyweight Reliance Industries Ltd was among the key losers, down 0.8 percent. The energy major reported its best quarterly profit, late on Friday, but outlook was dampened by concerns over the group's gas production.
In the broader market, gainers led the number of declines in the ratio of 2.6:1 on volume of 75 million shares.
The 50-share NSE index or Nifty was up 0.7 percent at 5,736.75 points.
The MSCI's measure of Asian markets other than Japan was trading marginally up 0.1 percent by 0510 GMT, while Japan's Nikkei was up 0.5 percent. However, most other markets in the region were trading in the negative.
STOCKS ON THE MOVE
* Auto components maker Bharat Forge was up 2.3 percent after the company beat market estimates with the third quarter net profit nearly tripling.
* Ashok Leyland, India's second-biggest bus and truck maker, fell 2.1 percent to 58 rupees after its quarterly profit slumped 59 percent.
MAIN TOP THREE BY VOLUME
* KSK Energy on nearly 8.3 million shares
* Cable Corp of India on 3.7 million shares
* Hindustan Machine Tools on 3.7 million shares