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Indian shares settled higher on Tuesday, lifted by consumer stocks after data showed domestic inflation was easing, although sustained foreign selling and losses in public sector banks capped the gains.

The Nifty 50 index was up 0.89% at 18,053.30 at close, while the S&P BSE Sensex rose 0.94% to 60,655.72.

"The Nifty is in a range of 17,800 - 18,200 as even with positive domestic cues like inflation slowing and corporate results so far being good, the market is bothered by continuous selling by foreign investors," Neeraj Dewan, director at Quantum Securities.

Domestic valuations are not cheap after India outperformed major global benchmarks last year, and with China re-opening its borders, funds are getting reallocated to those markets where valuations are relatively attractive, analysts said.

The blue-chip Nifty 50 index added 4.33% in 2022, while the MSCI's gauge of stocks across the globe slumped 19.8%.

Foreign institutional investors sold Indian stocks for the seventeenth day in a row on Monday from Dec. 23 - the longest run in six months. They have offloaded shares worth 246.51 billion rupees ($3.01 billion) since then.

In domestic trading, fast-moving consumer goods closed 1.2% higher on hopes that pressure on their margins would ease after data showed India's retail and wholesale price increases moderated in December.

Heavyweight Hindustan Unilever finished 2.7% up and was among the top gainers on the Nifty 50.

Construction major Larsen & Toubro Ltd closed at a record high to rise to the top of the blue-chip Nifty 50 winners.

Shares of public-sector banks, which gained in seven out of 12 sessions thus far this year, dropped 1.84%. The country's largest lender State Bank of India was the biggest drag to the Nifty 50, closing 1.7% lower.

Bank of India Ltd , down 4.6%, declined the most in the sector after it said provisions for bad loans in the third quarter jumped nearly 64% from a quarter ago.

($1 = 81.8000 Indian rupees)