The frontline Indian equity benchmarks are trading near their best levels for the session in the afternoon trade, spurred by sustained strength in select index heavyweights. The NSE Nifty is trading just above 5,000 while the BSE Sensex is hovering around 16,500. The gains in the Indian equities are continuation of the spurt seen in the past few sessions after a fall below 4,800 in the Nifty.

Also, the undertone is being fueled by healthy gains in other Asian markets. There is speculation that China will take steps to boost growth in the world’s second-largest economy. China’s finance ministry said that it will allocate as much as 2 billion yuan ($317 million) every year to support purchases of energy-efficient cars.

Media reports said that the National Development and Reform Commission, China's top economic planner, approved construction of several new steel plants, prompting some analysts to suggest that policymakers have already kicked off fresh stimulus measures.

The Nikkei in Tokyo gained 0.7% while indices in Hong Kong, China, South Korea and Australia all were up ~1% each. Taiwan's main index surged by ~3% today after the ruling party proposed a taxation system that seeks to ease the burden on individual investors on trading gains. The Taiex’s advance was the biggest among Asian benchmark indexes today.

Meanwhile, the European benchmarks opened with a positive bias as well after Monday's weak session.

At 12:48 pm (IST), the BSE Sensex was 16,515, up 98 points over the previous close. It had earlier touched a day’s high of 16,519 and a day’s low of 16,410. It opened at 16,500.

NSE Nifty was quoting 5,012, up 26 points over the previous close. It has earlier touched a day’s high of 5,013 and a day’s low of 4,982. It opened at 5,005.

HCL Tech, Ranbaxy Labs, Cairn India, SBI, Maruti Suzuki, TCS, and Tata Motors were among the notable leaders in the Sensex and the Nifty.

BPCL, IDFC and ITC were among the notable losers in the Sensex and the Nifty.

The BSE Small-Cap index and BSE Mid-Cap also advanced to 0.4% and 0.3% respectively.

All sectoral indices barring Consumer Durables and FMCG were trading in the green. IT, Auto, Teck, Consumer Goods, Metal, PSU, Power, Oil&Gas, Bankex, Realty and Pharma indices are the gainers.

Morgan Stanley has upgraded Reliance Industries (RIL) to "equal-weight" from "underweight", maintaining its target price at Rs 703, citing attractive valuations.

Despite Morgan Stanley's "unconstructive" view on RIL's core business, the US investment bank says that the Mukesh Ambani-owned company was trading at multi-year lows, making its valuations compelling.

RIL's ongoing buyback programme is also gaining momentum, Morgan Stanley says, seeing little downside for the stock.

RIL stock hit its lowest intraday level since March 2009 on May 16.

Separately, Morgan Stanley has downgraded its view on India's telecom sector to "in-line" from "attractive", citing increased regulatory risks tied to the spectrum auction, and relatively weaker 3G outlook.

The brokerage has cut its rating on Reliance Communications (RCOM) to "underweight" from "equalweight", and slashed its target price to Rs 51 from Rs 109, citing a weaker balance sheet. RCOM faced the highest regulatory risk, it says.

Morgan Stanley has also cut Idea Cellular to "equalweight" from "overweight", while reducing its target price to Rs 87 from Rs 134, citing its smaller balance sheet and a 32% outperformance in the last 12 months.

Bharti Airtel remains the only "overweight"-rated stock in Morgan Stanley's telecom coverage, with a target price of Rs 366, down from Rs 488 earlier.

In the currency market, the rupee declined versus the US dollar, retreating slightly after gaining in the past three sessions as the euro came under renewed pressure in the overseas market.

Dollar purchases by domestic oil companies and corporates was also seen dampening the sentiment for the rupee. Dollar demand from oil refiners typically rises towards the end of each month.

Traders also spotted bunched up outgoing corporate dollar remittances because Monday was a public holiday in the United States.

The rupee touched a day's low of 55.66 after opening at the day's high of 55.39 as against the previous close of 55.19. It touched 55.0100 yesterday, the strongest level since May 22. The rupee touched an all-time low of 56.3875 last week and has lost 7.5% this quarter.

The euro was poised for the biggest monthly decline since September. The 17-nation currency was 0.3% from the lowest since July 2010 after yield premiums on Spain’s securities over Germany’s rose to the most in 17 years.

The Dollar Index traded near the highest in 20 months as lingering worries about Europe’s turmoil boosted demand for safe haven assets.