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Indian shares edged up on Wednesday after a lacklustre start, led by gains in financials and energy stocks as investors bet on large-cap companies amid heightened volatility in small- and mid-caps after a record run.

The Nifty 50 index rose 0.38% to 20,070, while the S&P BSE Sensex settled 0.37% higher at 67,466.99.

The more domestically-focussed small-caps and mid-caps were volatile, swinging between gains and losses after logging their steepest intraday fall this year in the previous session.

Small-caps climbed 1.02% at the close, while mid-caps added 0.19%, after falling more than 1% each earlier in the session.

"Retail inflows could shift to large-caps from small- and mid-caps and support the blue-chips," said Saurabh Jain, assistant vice president of research at SMC Securities.

Financials and banks rose 0.41% and 0.87%, respectively, while energy stocks advanced 0.93% and public sector banks jumped 4.23%.

Meanwhile, the Reserve Bank of India revised investment classification and valuation norms for banks on Tuesday, which could reduce earnings volatility for lenders, analysts at Jefferies and Emkay Global Financial Services said.

Separately, SMC's Jain said the weakness in China could drive sustained foreign inflows into India, given the strong macroeconomic fundamentals.

Data released after the bell on Tuesday showed that India's retail inflation eased in August, while industrial output rose at its fastest pace in five months in July.

Among individual stocks, Coal India climbed 3.29%, topping the Nifty 50 index. Last week, the stock gained the most since listing, aided by the rising coal demand for power generation.

KEC International rose 2.69% and hit a record high after securing new orders.

NMDC gained 4.18% after brokerage ICICI Securities upgraded the stock, citing scope for volume growth.

Asian markets were subdued ahead of U.S. inflation data, due later in the day. [MKTS/GLOB]