(Reuters) -Indian benchmark indexes closed flat on Tuesday as profit booking in financials offset gains driven by optimism around the U.S.-China trade talks and continued policy support from the Reserve Bank of India.

The Nifty 50 closed little changed at 25,104.25, while the Sensex ended fell a marginal 0.06% to end at 82,391.72.

Both indexes rose about 0.4% in early trade before losing steam.

Valuations are stretched after the recent rally, making time correction and bouts of profit-taking likely in the near term, said Amit Jain, co-founder of Ashika Global Family Office.

Both the benchmark indexes gained about 2.3% in the last four sessions, with Nifty logging its highest closing levels since October 14 on Monday, buoyed by the RBI's policy support.

Seven of the 13 sub-sectors logged losses on the day. High-weightage financials and banks lost about 0.5% and 0.4%, respectively.

Index heavyweights HDFC Bank and ICICI Bank dropped 0.7% and 0.8%, contributing to the drag.

Analysts attributed the fall to profit-booking - rate sensitive sectors such as financials gained 2.8% in the last four sessions and the bank index rose 2.2%, both hitting a record high on Monday.

The broader, the more domestically focussed small-caps and mid-caps were also muted on the day.

Other Asian markets advanced, aided by expectations of progress on day two of trade talks between U.S. and China. [MKTS/GLOB]

IT companies, which earn a significant share of their revenue from the U.S., rose 1.7% on optimism over the trade negotiations.

Among individual stocks, Grasim added 3.7% after Morgan Stanley raised its target price to a Street-high 3,500 rupees and made the stock its top pick.

Coforge rose about 2% after JPMorgan reiterated the company as its top IT pick, citing strong growth prospects in fiscal 2026.

Tata Power rose 1.7% after its solar manufacturing arm crossed 4 GigaWatt of solar module production at its Tamil Nadu facility.

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

By Bharath Rajeswaran