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"High-risk, high-gain smallcap stock, DB Realty, is recommended for long-term investment of three to four years. Although it comes with corporate governance issues, the debt situation has eased and the property developer is set to receive cash flows from several projects. However, the IT sector remains unfavourable due to pricing power and volume growth challenges. "

However, Arun Malhotra of CapGrow Capital Advisors believes that the best time to deploy cash is during uncertainty, and one can seek alpha by investing in quality smallcap companies.

"What we are seeing here is the calm before the storm as far as earnings go," said Brad McMillan, chief investment officer of Commonwealth Financial Network. "The market is just trying to see, do we have some upside here or not, and I think it is really going to come down to earnings over the next couple of weeks."

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Stocks that were in focus include names like Indian Bank which was up more than 3%, JBM Auto which rose more than 6% and Glenmark Pharma which closed with gains of over 3%. All stocks hit fresh 52-week highs on Tuesday.

The Nifty Pharma index closed 1.64 per cent up at 12607.35.

Bankers are reluctant to take any MSME through the process anticipating a deep haircut while promoters of MSMEs do not want to risk losing their company to a third party. The government, meanwhile, is considering a similar process for larger companies as delays in cases are seen as potentially diminishing the appeal of the Insolvency and Bankruptcy Code (IBC).

Following a nudge from the finance ministry last fortnight, most government-owned banks identified companies they would prefer to sell to National Asset Reconstruction Company (NARCL), the people cited above said. NARCL will identify about 20-25 accounts from the list for acquisition this fiscal year.

"The biggest thing in ITC is that there are no near-term headwinds for the company," said Amnish Aggarwal, the head of research at Prabhudas Lilladher.

More than 6.8 million shares exchanged hands on the BSE and NSE compared with the combined average daily volume of 500,000 shares over the last month. Among the BSE 500 stocks, Tata Chemicals was the biggest loser on Tuesday.