"With the continued pressure of derivative contracts expiry, markets are in the consolidation mode. It has been a dismal quarter of earnings so far for the India Inc, adding to the spoiled sentiment," said Gaurav Jain, Director of Hem Securities.

After opening lower at 27,447.40 points, the Sensex continued to slide and touched the day's low of 27,363.72 points due to sustained selling. However, the Sensex bounced back following emergence of value-buying particularly in banking stocks in the last half-an-hour of trading on hopes of rate cut by RBI.

The barometer settled higher by 33.25 points or 0.12 percent  at 27,564.66. The gauge had lost 426.09 points in the previous two sessions on lower-than-expected earnings from blue-chip firms. The wider 50-issue NSE Nifty, however, closed down by 4.75 points or 0.06 percent at 8,334.60. On Sensex, among banking stocks, Axis Bank rose by 2.26 percent, HDFC Bank by 1.32 percent and ICICI Bank by 1.1 percent. State-run SBI gained 1.23 percent.

Foreign portfolio investors bought shares worth Rs 114.81 crore on Tuesday and domestic institutional investors bought worth Rs 123.85 crore, as per provisional data.

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