However, the key indices were able to pare losses only minimally in the last half hour of trade to close flat -- marginally in the green.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) inched up 3.45 points, or 0.04 per cent to 8,632.60 points.
The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 28,012.56 points, closed at 27,990.21 points -- up 4.67 points, or 0.02 per cent from the previous close at 27,985.54 points.
The Sensex touched a high of 28,028.98 points and a low of 27,902.78 points during the intra-day trade.
The BSE market breadth was slightly tilted in favour of the bears -- with 1,358 declines and 1,295 advances.
On Monday, both the key Indian indices were suppressed by negative global cues and a weak rupee.
The barometer index had receded by 91.46 points, or 0.33 per cent, while the NSE Nifty edged down 37.75 points, or 0.44 per cent.
Initially on Tuesday, the benchmark indices opened on a flat-to-negative note on the back of lower Asian and US markets.
The markets also traded with apprehension as caution prevailed ahead of a speech by Federal Reserve Chair Janet Yellen later in the week.
Investors are vigilant of a possible interest rate hike in the US as this can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
In addition, lower crude oil prices led the key indices to cap gains.
However, a positive bias prevailed in the indices due to a slight recovery in European markets.
Moreover, recovery in rupee value kept the market spirits buoyed.
The rupee appreciated by 13 paise to 67.06 against a US dollar from its previous close of 67.19 on Monday.
"The markets are devoid of any major action and are mostly in a consolidating phase at present," Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.
"However, the rupee is firm and has strengthened from yesterday's close. Also, the foreign institutional investors (FII) have been net sellers for the first time in August."
According to James, rollovers gained traction with derivatives' expiry approaching, infusing some life into an otherwise lacklustre market.
In terms of investments, provisional data with exchanges showed that both the FIIs and domestic institutional investors (DIIs) remained net sellers during the day's trade.
Sector-wise, the S&P BSE information technology (IT) index surged by 189.46 points, followed by the technology, media and entertainment (TECK) index, which edged up 101.85 points, and the banking index rose by 23.29 points.
On the other hand, the S&P BSE capital goods index plunged by 166.28 points, the oil and gas index declined by 159.80 points, and the fast moving cosumer goods (FMCG) index fell by 71.96 points.
Major Sensex gainers during Tuesday's trade were: Infosys, up 2.35 per cent at Rs 1,039.25; Tata Consultancy Services (TCS), up 2.03 per cent at Rs 2,603.20; Asian Paints, up 0.99 per cent at Rs 1,124.45; Bharti Airtel, up 0.96 per cent at Rs 353.55; and Wipro, up 0.82 per cent at Rs 519.55.
Major Sensex losers were: NTPC, down 2.90 per cent at Rs 158.80; Bajaj Auto, down 1.92 per cent at Rs 2,875.25; Larsen and Toubro (L&T), down 1.11 per cent at Rs 1,475.60; ITC, down 1.08 per cent at Rs 251.30; and Sun Pharmaceuticals, down 0.97 per cent at Rs 762.50.
