The 30-share Sensex ended at 20,247 up 34 points. Nifty ended up 23 points at 6,170.
Markets edged higher after a weak opening but gains were capped as profit taking was seen at higher levels after the sharp surge on Wednesday.
This follow's Wednesdays smart 2.5% rally - its biggest single-day rise in almost 18 months on growing optimism that the Reserve Bank of India (RBI) will slash key rates in the upcoming policy review in June.
"Nifty future has been making higher tops - higher bottom from last five consectives weeks. It managed to hold important support of 5980 and arllied towards 6200 levels.
If Nifty manages to hold 6200 levels then it may head towards life time of 6340-6350 levels.
"But if fails to cross 6200 then a small profit booking dip may be seen towards 6130-6080 levels," said Chandan Taparia, Derivative Analyst, Anand Rathi Financial Services.
Asian markets ended mixed. Japan's Nikkei stock average fell on Thursday, reversing from a fresh 5-1/2-year high earlier in the session, after banks offered downbeat earnings guidance and investors took profits in the face of doubts prompted by the breakneck speed of recent rises. The market was also dented by weak company capital spending by over the March quarter.
Meanwhile, Shanghai Composite added 1.2% to 2252. Foreign institutional investors (FIIs) bought shares worth a net Rs 1646.95 crore on Wednesday.
Back home in India, broader markets rose in line with the Sensex. BSE mid-cap index outperformed with half per cent gains at 6,592. Small-caps were up 0.2% at 6,191.
Realty index rose for the second straight day on expectations that the RBI may further cut policy rates to perk up economic growth after the latest data showed a sharp fall in wholesale price inflation in April 2013.
The index was up 2% at 1,992.
Analyst at Bank of America Merrill Lynch expect the RBI to cut policy rates 25bp on June 17 and have preponed another 25bp rate cut to July 30
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