The Sensex closed at 37,350.33, higher by 38.80 points over its previous close of 37,311.53, while the Nifty closed 18.40 points higher at 11,047.80.
"Prospects of the government considering steps to revive the economy with stimulus measures and recovery in crude prices due to easing recession helped the market, " said Vinod Nair, Head of Research, Geojit Financial Services.
"Until prompt and effective actions are announced by the government, the market will react to upcoming economic data which is weak, he added.
However a Kotak report has said that the government has limited scope to provide a fiscal stimulus given the fiscal constraints.
Besides, the just concluded corporate earning declarations easing failed to cheer investors.
"The just concluded earnings season was not encouraging either and brokerage houses will soon scale down their full year Nifty earnings. This will restrict upside for the Nifty in the near term," said Sanjeev Zarbade, VP PCG Research, Kotak Securities.
Global markets have witnessed a sell-off after the inversion in the bond yield curve stoked fears of a recession.
The top gainers among the 30 Sensex stocks were Yes Bank, Power Grid, Maruti Suzuki, IndusInd Bank and Axis Bank, advancing in the range of 1 to 4 per cent.
The top losers were TCS, Tata Motors, Vedanta, HCL Tech and HDFC. They declined up to 2 per cent.
( With inputs from IANS )