The Sensex and Nifty on Thursday inched up to fresh highs, tracking global equities, after Washington and Beijing signed an initial trade deal aimed at diffusing their 18-month tariff war, while investors shifted focus to domestic corporate earnings.
China will boost spending on U.S. products in exchange for the rolling back of some tariffs under an initial trade deal signed by the world's two largest economies on Wednesday.
The contentious trade talks had cast a pall over global markets for much of 2019 until signs a deal was in place late last year helped lift sentiment.
The NSE Nifty 50 index was up 0.28% at 12,378.15, as of 0432 GMT, while the benchmark S&P BSE Sensex ticked 0.35% higher to 42,017.46.
The deal, however, does not address structural economic issues that led to the conflict nor does it fully eliminate U.S. tariffs on Chinese goods.
"Markets had already priced in the trade deal, so now investor focus has turned to domestic earnings and the budget due next month where reforms are expected," said Sumit Pokharna, vice-president, Kotak Securities.
Providing a fillip to investor confidence was a Reuters report on Wednesday that India is planning a new law to protect foreign investment by speeding up dispute resolution, aiming to attract more capital from overseas to boost stuttering domestic growth.
Sentiment got a further boost after data showed that India's trade deficit narrowed to $11.25 billion in December from last year, helped by lower oil imports.
Private-sector lender Yes Bank Ltd, up as much as 2.3%, was the top gainer on the Nifty. Drugmaker Sun Pharmaceutical Industries Ltd climbed 1.3% to a near seven-week high.
Cable television company DEN Networks Ltd jumped 5% to its highest since Sept. 25, 2019 after reporting a profit for the December quarter, compared with a loss last year.
The Nifty Metal Index dropped 0.9%. Miner Vedanta Ltd, the biggest loser in the Nifty insex, dropped as much as 1.8%, while Tata Steel Ltd and JSW Steel Ltd declined 1.2% and 1.8%, respectively.