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Indian shares rose on Tuesday, led by a rebound in financials, while easing domestic inflation and hopes of an increase in foreign inflows aided sentiment.

The NSE Nifty 50 index rose 0.59% to 21,743.25, while the S&P BSE Sensex settled 0.68% higher at 71,555.19.

Eleven of the 13 major sectors logged gains. Financials, the highest-weighted of the 13 major sectors, gained 1.37% on the day after dropping 1.41% in the previous session.

"The outlook for domestic equities remains positive, with cooling core inflation and rising weightage in the MSCI Global Standard index aiding sentiment," said Sanjeev Hota, vice president and head of research at Sharekhan.

India's retail inflation cooled to a three-month low in January, indicating macroeconomic stability, while global index provider Morgan Stanley Capital International (MSCI) raised India's weightage in its Global Standard index.

"India could witness upwards of $1.2 billion passive foreign portfolio investor (FPI) inflows due to the index revision," said Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research.

The broader, more domestic-focussed small-caps and mid-caps rose 0.17% and 0.34%, respectively, underperforming the blue-chips for the third session in a row.

"The recent correction in small- and mid-caps is healthy and much needed to clear the froth in the segment and provide new entry opportunities," said Sanjiv Bhasin, a director at IIFL Securities.

On the flip side, metals lost 2.07%.

Aluminium maker Hindalco dropped 12.42% after missing December-quarter profit estimates on weak aluminium sales and cost escalation at U.S. unit Novelis.

Paytm tumbled 10% and hit a record low after brokerage Macquarie downgraded the stock, citing "serious risk of exodus of customers", after the central bank's recent clampdown on Paytm's banking arm.

Asian markets advanced ahead of a key U.S. inflation reading, due later in the day, which could influence the timing of U.S. rate cuts. [MKTS/GLOB]