Sensex rose on Thursday tracking a recovery in global markets with energy shares leading the gains while financial and auto shares bounced back.
Key indexes had on Wednesday recorded their highest intraday loss in over two months, triggered by a slump on the Wall Street due to a lack of clarity in U.S President Donald Trump's economic policies.
U.S. shares recovered on Wednesday while Asian stocks rose on Thursday, taking cues from gains on Wall Street.
"The bounce-back is due to both global and local factors. Mutual funds are getting record-high inflows everyday. Flows have been very strong on both domestic and FII (Foreign Institutional Investors) fronts," said Miraj Vora, derivative analyst at Prabhudas Lilladher Pvt Ltd.
As per the provisional data available on the NSE website, FIIs were net buyers of stocks worth 3.57 billion rupees on Wednesday.
The broader NSE Nifty was up 0.47 percent at 9,072.50 by 0610 GMT, while the benchmark BSE Sensex was 0.46 percent higher at 29,300.41.
"We are heading into the expiry week. So there would be pressure on that front. It's looking very difficult for the Nifty to cross the 9,150-9,200 levels on the upside or break 9,000 on the lower side for this expiry," added Vora.
Energy sector topped the gains on the NSE index while the S&P BSE Oil & Gas index gained 1.42 percent. Major oil marketing companies, including Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd and Indian Oil Corp Ltd, were all up more than 2 percent each even as oil prices remained under pressure.
The finance and the auto sector recovered from the previous day's fall.
ICICI Bank gained 1 percent and Tata Motors was trading 2.4 percent higher, after falling 2.6 percent and 2.9 percent, respectively, on Wednesday.
"Banks have recovered today, but a meeting to discuss waiver of farm loans is scheduled on Friday and if something drastic comes out of that meeting, we may see banks facing some pressure," added Vora.
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Vyas Mohan)