The Sensex closed 40.55 points higher at 3713.18, after witnessing some selling pressure in late afternoon trading. The Sensex opened firm at 3691.52, but later dipped to the day's low of 3652.70 at the initial stages.

However, it later recovered smartly to close higher at 3713.18. The BSE-100 index advanced by 26.76 points to 1644.05 from previous close of 1617.29. S&P CNX Nifty closed 2.65 points higher at 1063 against Saturday's close.

According to brokers and fund managers, the Sensex looks set for a small rally now that it has tested the 3650 lower resistance a couple of times last week and survived. "The index has been correcting downwards since March 15 and appears to have taken support at 3,650 level. The index may move upwards by about 150 points to test a level of 3,800 once again. This week, the index will attempt to breach 3,800, failing which theindex may go on a medium-term correction and test the levels of 3,515," said Malay Sameer, fund manager with Apple Mutual Fund.

"The markets went up 50 points and towards the end reflected a strong undertone. Technically, 3792 is a very strong resistance level and the Sensex has reversed twice from 3,792 and 3,823 levels. If the index is able to penetrate 3,823, then we can witness a strong rally," said Parag Dalvi, institutional sales manager at Pranav Securities. Software scrips reported mixed performance while pharm stocks strengthened on renewed buying from institutions and large investors. Punters who had exited the counter after the passage of the Patents Bill, once again took positions in the sector, said market sources.

Satyam Computers witnessed hectic buying and closed at the upper price band on news that the company has been awarded the prestigious level-5 certificate from the Software Engineers Institute of the US. The level-5 certificate puts Satyam in the company of IT giants like IBM andMotorola and qualifies it to undertake US government's work order. Other major software stocks closed around the same levels ahead of the last trading day of the current settlement on NSE. Pentafour Software closed 0.81 per cent lower, while NIIT closed 0.21 per cent lower and Infosys almost at the same range at Rs 2884.

Second-rung software scrips reported a mixed performance, with Silverline rallying to Rs 376, while Rolta was range-bound and TVS Electronics on the lower price band. Value investing is gaining popularity among high networth investors and Scrips like Henkel Spic, Subros, Denso India, which have been closing at the upper price band for the last couple of trading sessions, continued to attract buyers. GE Shipping has now joined the group by gaining by over 7 per cent after touching a low last week. "The rally will not pertain only to the big stocks, but would also encompass the side stocks.

The market is set to hold firm despite the periodic corrections. Ultimately, the market will rallyupwards, even if there is a slight correction in between," said BSE broker Dilip Bhat.