The BSE Sensex nudged higher on Tuesday after a three-day slide on expectations the RBI will shift its policy stance toward supporting growth from fighting inflation after a steep drop in factory output.
By 12:33 p.m. (0703 GMT), the main 30-share BSE index was up 0.17 percent at 15,898.86, after dropping as much as 0.6 percent in early trade.
The market is expecting a cooling in interest rates, which may trigger an uptrend in the short-to-medium term, said Suresh Parmar, associate vice president for institutional equities at KJMC Capital Markets.
After raising interest rates 13 times since early 2010 to fight inflation, the central bank is widely expected to pause when it reviews policy on Friday after data on Monday showed industrial output slumped 5.1 percent in October.
Infosys (INFY.NS) rose 0.35 percent, while Tata Consultancy Services (TCS.NS) climbed 0.4 percent as the rupee slumped to a record low, which could boost the earnings of the export-driven software services companies.
Energy major Reliance Industries (RELI.NS), which also exports petroleum products, firmed 1.5 percent.
The rupee fell to an all-time low of 53.35 to the dollar as shrinking domestic factory output and worries Europe's debt crisis could dampen global risk appetite triggered a scramble for dollars.
Engineering conglomerate Larsen and Toubro (LART.NS), which could be hit by a slump in capital goods investment, fell 1.8 percent.
ICICI Bank (ICBK.NS), the country's largest private sector lender, dropped nearly 1 percent and state-run explorer Oil and Natural Gas Corp (ONGC.NS) shed 1.2 percent.
The 50-share NSE index was up 0.2 percent at 4,774.65.
In the broader market, losers led gainers 923 to 423 on a total volume of about 273.4 million shares.
Asian stocks sank on Tuesday and the euro languished near a two-month low as investors took fright at the prospect of mass euro zone sovereign ratings downgrades after the outcome of a last chance European Union summit failed to convince markets.
The MSCI's broadest index of Asia Pacific shares outside Japan was down 1.23 percent.
STOCKS ON THE MOVE
* Essar group companies fell as much as 10 percent after the police filed fraud charges against five group executives as part of a multi-billion-dollar telecom case.
* Apollo Hospital Enterprise (APLH.NS) was down 4.5 percent, after JPMorgan raised the target price to 650 rupees from 590 and maintained an 'overweight' rating on expected improvement in efficiency.
* Indiabulls Real Estate (INRL.NS) gained for the second consecutive day after the realtor said its board would meet on December 15 to consider a buyback.
TOP THREE BY VOLUME
* Jaiprakash Associates (JAIA.NS) on 614.62 million shares
* NHPC Ltd (NHPC.NS) on 9.23 million shares
* Suzlon Energy (SUZL.NS) on 8.79 million shares