Banking stocks notched up smart gains ahead of the RBI's Monetary Policy with ICICI Bank gaining more then 1 per cent in trade, while Axis Bank and State Bank of India were also trading higher.

PSU banking stocks were trading with gains with notable winners being Bank of India, Andhra Bank, Oriental Bank, IDBI Bank and Canara Bank.

Software stocks, however, declined on the strength in the rupee. IT stocks that slid were TCS and HCL Technologies. Coal India continued to drop and fell 1 per cent, after its 5 per cent loss on Monday on reports of divestment in the company.

Telecom stocks were trading higher after the telecom Regulatory Authority of India extended to April 5, the date for sending comments on review of tariffs for roaming.

SKS Microfinance jumped 2 per cent after reports that the Supreme Court has allowed the company to resume operations in Andhra Pradesh.

GVK Power saw buying interest after reports that infrastructure conglomerate is open to diluting its stake in various holdings including airports, the mining company in Australia and road projects at the project or company level to a strategic or financial investor.

Mid cap stocks were also trading higher with the index up 0.32 per cent in early trade. The stocks that gained from the space included Apollo Tyres, GMR, Punj Lloyd and Tech Mahindra.

Meanwhile, markets in Asia were trading higher after the large fall witnessed on Monday following the Cyprus bailout package.

Indian markets are likely to take cues from the RBI Monetary Policy to be announced later today.

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