The Indian equity markets held on to the gains as investors waited for the Reserve Bank of India's rate action in the policy review next week.
The Sensex closed at 20,026.61, up 0.23 percent, and Nifty at 6054.30, up 0.10 percent.
On the economic front, Finance Minister P Chidambaram said India's economy will grow "no better than" 5.7 percent in the current fiscal year but will regain traction in 2013/2014 and that the government is committed to fiscal prudence in the budget and brushing off threats of a downgrade.
Maintaining that he cannot discuss Budget details, the Minister said "one of the principal considerations will be adhering to the path of fiscal prudence. That will be one of the main themes of the Budget."
Asked about raising revenue, he said, "the other theme will be protecting one's tax base and augmenting tax revenues."
Bringing some respite, British bank RBS has said in a note that equity markets will turn attractive and bonds and gold are likely to lose their sheen this year as domestic growth revives following the recent reforms and the improving global environment.
Additionally, veteran emerging markets investor Mark Mobius sees a bumper year ahead for riskier, high-yielding assets as hundreds of billions of dollars flows off bank balance sheets and back into markets.
While banks had so far used ample central bank liquidity to bolster balance sheets and buy safe-haven US Treasuries, Mobius told Reuters that sentiment was turning towards greater risk appetite.
Stocks in news
HDIL closed down 14 percent on Wednesday after Vice Chairman and Managing Director Sarang Wadhawan sold a partial stake in the company.
JaypeeInfratech closed 9 percent down after the news that the parent company will sell up to 98.5 million shares on Thursday to raise up to $94 million to meet the market regulator's guidelines on minimum public shareholding.
Bharti Airtel closed up 4 percent after the company said it has not implemented any headline tariff increase, which means there is no direct increase in voice tariffs.
Hindustan Unilever extended losses and closed 4 percent down following disappointing earnings.
With inputs from Agencies