The Sensex and the Nifty edged higher on Thursday, marking their third straight day of gains, led by a rise in software exporters as Tata Consultancy Services and Infosys gained after rival HCL Technologies' revenue warning.

Drugmakers such as Lupin also rose on hopes of better-than-expected earnings in September-quarter due to favourable currency moves.

The Sensex ended higher by 66.12 points or 0.25 per cent at 26,220.95 and the Nifty ended up by 2 points or 0.03 per cent at 7,950.90.

The NSE index touched an intraday high of 8,008.25 points, a level last seen on September 22. The BSE index touched a high of 26,431.80 and a low of 26,168.71.

Among BSE sectoral indices, healthcare index gained the most by 1.46 per cent, followed by consumer durables 0.89 per cent, capital goods 0.73 per cent and TECk 0.24 per cent. On the other hand, realty index was down 1.82 per cent, followed by power 0.55 per cent, auto 0.45 per cent and banking 0.37 per cent.

Top five Sensex gainers were Lupin (+3.62%), Sun Pharma (+2.57%), TCS (+2.01%), Dr Reddy's (+1.8%) and L&T (+1.54%) while the major losers were BHEL (-2.85%), GAIL (-2.6%), Maruti (-2.33%), VEDL (-1.82%) and HDFC (-1.15%).

Both the BSE and NSE indices paused for a breather on Thursday as investors booked profits in stocks that ran up in the previous two sessions.

Sentiment was also tempered by data that showed the country's manufacturing activity in September slowed more than expected to a seven-month low.

Earlier in the session, domestic markets markets drew strength from overnight gains in Wall Street and upbeat Asian markets. Chinese financial markets are closed from October 1 to October 7 for national holidays.

"It's primarily profit-booking. Eight thousand is a sentimental resistance for the Nifty," said Arun Gopalan, Vice-President research at brokerage Systematix Shares & Stocks.

"We will be in a range for sometime until (corporate earnings) results start coming in."

A report by SMC Global said "Asian stock markets opened mostly higher, following solid US payroll data, while caution remained over the outlook for emerging-market economies. US stocks rallied into the close Wednesday, driven by gains in consumer discretionary, materials and healthcare sectors. But the main indexes still ended the month and a quarter with steep losses.Reflecting strong job growth at large businesses, payroll processor ADP released a report on Wednesday showing stronger than expected private sector job growth in the month of September. The report said private sector employment jumped by 200,000 jobs in September following a downwardly revised increase of 186,000 jobs in August. Economists had expected an increase of about 190,000 jobs, which would have matched the job growth originally reported for the previous month."

Brokers said the domestic sentiment turned bullish after RBI Governor Raghuram Rajan sprang a surprise by announcing a bigger-than-expected interst rate cut of 0.50 per cent to 6.75, lowest in four-and-half years to boost the country’s economic growth.

European shares rose on Thursday as a rebound in mining stocks and gains in the automotive sector lifted the region's markets back up following the end of a bruising third quarter.

The pan-European FTSEurofirst 300 index rose 1.5 per cent, while the euro zone's blue-chip Euro STOXX 50 index and Germany's DAX both gained 1.2 per cent.

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