The frontline Indian equity benchmarks accelerated in mid-afternoon trade after Germany's top court rejected calls to block the ratification of Europe's €500bn (US$643.7bn) permanent rescue fund, the European Stability Mechanism (ESM), and the fiscal pact. 

At 2:21pm (IST), the BSE Sensex was trading at 17,972, up 119 points over the previous close. It had earlier touched a day's high of 17,973 and a day's low of 17,884. It opened at 17,916.

The NSE Nifty was quoting at 5,417, up 27 points over the previous close. It earlier touched a day’s high of 5,423 and a day’s low of 5,393. It opened at 5,404.

RIL, Wipro, Tata Power, HDFC Bank, ONGC, ICICI Bank, L&T, Sun Pharma, Coal India, Tata Steel, Maruti Suzuki, HUL, Tata Motors are among gainers in BSE Sensex and Nifty.

Infosys,TCS, Hero MotoCorp, Bharti Airtel, BHEL are among losers in BSE Sensex and Nifty.

The BSE Small-Cap index and BSE Mid- Cap index was trading at 0.32% and 0.31%.

PSU,  Metal, FMCG, Auto,  IT, Teck, Oil and Gas, Capital Goods,Bankex indices are the gainers.

HC and Power indices are the losers.

The judges attached various conditions to the ESM while adding that German liability under the permanent bailout fund should not exceed €190bn. Complaints against the ESM are largely unfounded, the German court said.

The Stoxx Europe 600 index gained 0.4%. The DAX in Germany was up 0.9% while France's CAC 40 advanced 0.5% and the FTSE 100 in the UK climbed 0.2%.

US stock market futures rose in European trading after the German court's verdict on ESM and the euro area fiscal compact.

Stock futures for Dow Jones, S&P 500 and the Nasdaq Composite were all up ~0.5% each.

Prices of gold, oil and other commodities pushed higher in the wake of the German court ruling. Gold for December delivery was up 0.5% while Silver for December delivery rose by ~1%. Crude oil for October delivery rose by 0.5%.

The euro held on to its gains against most major currencies, while the dollar stayed lower. The euro surpassed US$1.29 mark from US$1.2857.

Germany is the only country that hasn’t ratified ESM, which offers loans to eurozone member states and may buy their bonds to lower borrowing costs.

The key Indian stock indices are trading close to their intraday highs despite a disappointing report on industrial production for the month of July. The BSE Sensex and the NSE Nifty are up ~0.5% each. The Nifty has managed to stay above the crucial 5,400 mark after surpassing that barrier earlier in the morning. The overall market breadth is positive on the back of decent gains in the broader indices. Barring Power and Pharma sector indexes, most other sectoral plays are trading with a positive bias.

India's industrial production barely moved in July, as weakness persisted in the critical areas of the economy such as manufacturing, mining and capital goods amid sticky inflation, high interest rates, fragile currency, global slowdown and policy paralysis.

The combined output of Factories, Mines and Power Utilities, as measured by the index of industrial production (IIP), inched up by a measly 0.1% in July 2012 as against expectations of a 0.5% growth.

India's industrial output was at 3.7% in July last year.

The Commerce Ministry said today that IIP for June was left unchanged at -1.8%.

The cumulative growth for the period April-July 2012-13 stands at (-) 0.1% versus a decent 6.1% expansion in the year-ago period.

Meanwhile, HSBC has downgraded Indian stocks to "underweight" from "neutral", saying that the debt crisis in Europe would be a drag on global equities, while on the domestic front, the country has seen no progress on fiscal consolidation or structural reforms.
"The newsflow will be probably negative for the market, making investors nervous," HSBC said in a report on Wednesday.

The undercurrent is positive amid expectations of additional stimulus measures from the US Federal Reserve at the end of its two-day policy meeting that kicks off today. Fed chairman has indicated in the recent past that the US central bank has scope for fresh monetary easing if the need arises. One will have to wait and watch whether the much-awaited announcement on QE3 comes this week or gets deferred to a later date.

Also, Chinese prime minister Wen Jiabao has suggested that his government too has room for taking additional fiscal and monetary measures to spur growth in the world's second largest economy. He has also expressed confidence of meeting the 7.5% GDP growth forecast for this year.

Indian indices rebounded on Tuesday after a subdued opening, with the NSE Nifty managing to close above 5375 levels. From here on, 5349 could act as a stop loss for long positions.

Trend in FII flows: The FIIs were net buyers of Rs. 4.23bn in the cash segment on Tuesday while the domestic institutional investors (DIIs) were net sellers of Rs. 3.65bn, as per the provisional figures released by the NSE.

The FIIs were net buyers of Rs. 7.70bn in the F&O segment on Tuesday, according to the provisional NSE data.

The foreign funds were net buyers of Rs. 7.27bn in the cash segment on Monday while the mutual funds were net sellers of Rs. 1.53bn on the same day, according to the SEBI figures.