Consumer <.FTNMX3720><.FTNMX3530> , real estate <.FTUB8600><.FTNMX8670> , healthcare <.FTNMX4570><.FTNMX4530> and utility <.FTNMX7530> stocks led gains, offsetting declines in material stocks <.FTNMX1770>.

The blue-chip FTSE 100 closed up 0.4%, while the mid-cap FTSE 250 added 0.7%.

Broader Europe traded mixed, while Wall Street fell as a $1 trillion (776.5 billion pounds) aid package announced by the U.S. Senate Republicans on Monday faced immediate opposition from both Democrats and some Republicans.

"The market is lacking one central narrative at the moment," said Connor Campbell, markets analyst at SpreadEx. "It's caught between last week's news and anticipation for the big events this week.

"We'll have to wait till at least tomorrow evening which is when the really juicy stuff comes about," he said referring to the outcome of the Fed meeting. "A more accurate reflection of how the markets are feeling might be seen by the end of the week."

The Fed is expected to reiterate its accommodative stance, with analysts also expecting it to lay the groundwork for more action later this year.

Massive global stimulus and hopes of an eventual COVID-19 vaccine have seen the FTSE 100 rally for the last three months, but it has struggled in July as surging coronavirus cases threaten a nascent economic recovery.

Among individual stocks, greeting card retailer Card Factory posted its best day in more than a month as sales at its stores since they reopened had exceeded expectations, while consumer products maker Reckitt Benckiser rose 1% on reporting better-than-expected quarterly results.

Despite posting a jump in sales, food-to-go retailer Greggs slumped 6.2%, as investors fretted about the impact of social distancing on sales volumes at re-opened stores.

Mining majors BHP and Rio Tinto slipped as iron ore prices declined.

(Reporting by Sagarika Jaisinghani in Bengaluru; editing by Uttaresh.V, Subhranshu Sahu and Nick Macfie)

By Sagarika Jaisinghani and Susan Mathew