Feb 18 (Reuters) - India's equity benchmarks shook off a sluggish start to close higher on Wednesday, with financials and metal stocks leading the advance, while IT lagged on persistent uncertainty around AI and kept a lid on broader gains.

The Nifty 50 rose 0.37% to 25,819.35 and the BSE Sensex added 0.34% to 83,734.25, their third straight day of gains.

Both benchmarks opened flat and edged 0.2% lower in the early session, before staging a recovery in the final two hours of trade.

Fifteen of the 16 major sectors rose. State-owned lenders added 1.3% after advancing 2.1% in the previous session. The heaviest-weighted financials rose 0.6%.

Metals gained 1.3%, reversing previous session's losses, after media reports quoted U.S. trade representative Jamieson Greer saying that Washington is open to simplifying steel tariffs amid industry pushback.

Steel makers Tata Steel rose 2.9%, JSW Steel gained 0.7% and Steel Authority of India added 1.4%.

The broader small-caps and mid-caps added 0.5% each.

On the flipside, IT index fell 1.2%, pulling back from a 1% rise in the previous session.

All 10 constituents of the IT index declined, with Infosys shedding 1.3% to give away previous session's gains.

Infosys' collaboration with Anthropic highlights Indian IT's accelerating AI push, but uncertainty over how well software firms can protect their earnings is driving a short-term rotation into sectors offer clearer visibility such as financials, said Kranthi Bathini, director of equity strategy at WealthMills Securities.

Markets are likely to consolidate with a positive bias as the third-quarter earnings season did not throw up any major negative surprises, he said, adding that trade deals with the U.S. and the European Union have also kept the broader backdrop constructive.

Among stocks, Dilip Buildcon gained 4.1% after emerging as the lowest bidder for a 7.02-billion-rupee project.

Cigarette makers such as ITC and Godfrey Phillips extended gains to rise 2.2% and 19.9%, respectively, after they hiked prices of tobacco products a day earlier.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Janane Venkatraman and Sonia Cheema)

By Bharath Rajeswaran