The Sensex and Nifty rose more than 1 percent on Wednesday, recouping most of the losses in the previous session, led by gains in financials such as Housing Development Finance Corp, while metal stocks climbed on higher prices for the commodity.
Sentiment was also supported by a recovery in broader Asia as concerns stemming from North Korea's firing of a missile over Japan receded, with MSCI's broadest index of Asia-Pacific shares outside Japan rising 0.5 percent.
Local trading volumes, however, were muted as floods caused by heavy seasonal monsoon rains destroyed homes and disrupted traffic in India's financial capital Mumbai on Tuesday, causing many people to stay home on Wednesday.
"What we are seeing is a bounce-back from Tuesday's fall," said Sacchidanand Uttekar, equity technical analyst at Motilal Oswal Securities.
The Nifty was up 1.12 percent at 9,905.30 as of 0658 GMT, while the Sensex rose 1.05 percent to 31,717.75.
Financial stocks accounted for more than a third of gains on the NSE index, with Nifty finance index gaining 1.2 percent. Housing Development Finance Corp Ltd rose 2.3 percent after giving up 2.2 percent on Tuesday.
Private-sector lenders such as ICICI Bank Ltd and HDFC Bank Ltd were up about 1 percent each.
Ujjivan Financial Services Ltd hit a one-and-a-half-month high after its subsidiary Ujjivan Small Finance Bank was granted "scheduled bank" status by the Reserve Bank of India, a lender category determined by the central bank.
Meanwhile, the Nifty metal index advanced 2.4 percent, with JSW Steel Ltd and Hindalco Industries Ltd both surging about 4 percent.