Overseas funds continued to chase stocks on Thursday after Foreign Portfolio Investors (FPI) bought shares worth Rs 251.36 crore on Wednesday, as per provisional data.

HDFC Bank, SBI, L&T, M&M, Bajaj Auto, Sun Pharma, Axis Bank and Hero MotoCorp notched up smart gains while HDFC, Sesa Sterlite, Tata Steel, NTPC, Hindalco and Tata Power fell.

"Profit booking and consolidation continued at higher levels. Global cues were mixed, however, lower crude oil prices boosted overall market sentiment," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.

The BSE 30-share barometer resumed almost stable but later rallied to a high of 26,464.80 before falling back to a low of 26,262.52 on weak Asian closing after Chinese manufacturing activity fell to a three-month low in August, as per HSBC's manufacturing purchasing managers index.

However, it bounced back after European markets were trading in positive terrain in late morning deals. The Sensex finally closed up by 45.82 points, or 0.17 percent, to 26,360.11. On Wednesday, it had dipped by 106.38 points.

The Sensex hit its record close of 26420.67 on August 19.

Similarly, the NSE 50-issue Nifty recovered by 15.80 points, or 0.20 percent, to end at 7,891.10. On Wednesday, it fell by about 22 points on profit-taking.

Nifty's record close of 7,897.50 was hit on August 19.

Stocks of steel companies, however, met with selling pressure after government on Wednesday gave nod to increasing royalty rates on minerals. Soft data from China, the biggest consumer of metals, also took a toll, brokers said.

In oil markets, US benchmark West Texas Intermediate for October delivery was down 27 cents at USD 93.18 while Brent for October eased 26 cents to USD 102.02 in afternoon trade.

On the global front, Asian markets mostly closed down while Europe was last trading up.

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