The market pared gains in early afternoon trade. At 12:20 IST, the barometer index, the S&P BSE Sensex, was up 259.20 points or 0.73% at 35,954.30. The Nifty 50 index was up 75.50 points or 0.70% at 10,802.85. The undertone of the market continued to be strong amid positive global cues. The Nifty was trading a tad above 10,800 mark. The Sensex slipped below 36,000 mark after crossing that level in morning trade.

The indices opened higher and extended gains in morning trade. Indices pared gains in early afternoon trade.

Among secondary barometers, the BSE Mid-Cap index was up 0.26%. The BSE Small-Cap index was up 0.52%.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1414 shares rose and 873 shares fell. A total of 163 shares were unchanged.

Cement shares were in demand. Ambuja Cements (up 1.50%), UltraTech Cement (up 1.24%) and ACC (up 0.80%), edged higher.

Grasim Industries was up 2%. Grasim has exposure to cement sector through its holding in UltraTech Cement.

Most telecom shares declined. MTNL (down 2.99%), Tata Teleservices (Maharashtra) (down 1%), Reliance Communications (down 0.14%) and Bharti Airtel (down 0.03%), edged lower. Vodafone Idea was up 0.55%.

Overseas, Asian shares advanced on Monday as a dovish turn by the Federal Reserve and startlingly strong US jobs data soothed some of the market's worst fears about the global outlook.

Investor sentiment also picked up slightly ahead of a round of trade negotiations between the United States and China in Beijing. The US and China will hold vice ministerial level trade talks in Beijing on January 7-8, according to the Chinese commerce ministry.

US stocks surged higher on Friday, buoyed by a better-than-expected jobs report for December and dovishly interpreted remarks by the chairman of the Federal Reserve.

The Bureau of Labor Statistics said the US economy added 312,000 jobs in December. The surge in hiring was the largest since February.

Investor optimism was further reinforced by comments by Federal Reserve Chairman Jerome Powell, who said during a Friday morning appearance that the jobs report didn't materially increase concerns over rising inflation, while reiterating that the central bank would continue to keep an open mind about how much it will raise interest rates in 2019 and how aggressively it will shrink its balance sheet, based on incoming data about the US and global economy, including recent weakness in equity markets.