The BSE benchmark Sensex recovered sharply by 170 points on renewed buying across-the-board on value buying at lower levels amid strong Asian markets.
The gains were led by FMCG, Realty, Banking, Power, Metal and PSU stocks. All the 13 sectoral indices on BSE were in the green.
The 30-scrip index opened higher at 16,119.08 and moved between 16,204.11 and 16,104.64 before quoting at 16,200.01 at 1030 hours, up 169.92 points or 1.06 per cent from Wednesday.
The NSE 50-share Nifty also firmed up by 51.55 points or 1.06% to 4,909.80 at 10.30 am.
Asian markets were mostly higher on Thursday as dealers got some upbeat news in data showing Japan's economy grew faster than expected, although the Greek crisis continued to cast a shadow.
The euro also edged back up after plunging to four-month lows against the dollar on Wednesday, with investors increasingly nervous that Athens will eventually exit the eurozone.
Tokyo rose 0.86%, or 75.42 points, to 8,876.59 and Seoul added 0.26%, or 4.71 points, to 1,845.24 but Sydney eased 0.19%, or 8.1 points, to 4,157.4.
In the afternoon Hong Kong added 0.73% and Shanghai climbed 1.24%.
The region took a breather and bargain hunters moved in after a recent sell-off caused by May 6 polls in Greece and France that saw a massive backlash against austerity measures.
"We've seen quite a retreat since last Monday (May 7), and people are asking when it will bottom out, and we are seeing a bit of that now," said Justin Harper, market strategist at IG Markets.
In Greece a senior judge was named prime minister and charged with holding fresh elections after more than a week of talks between party leaders failed to muster a coalition.
Economists fear the deadlock -- and elections next month are likely to see anti-austerity parties succeed -- will eventually mean Greece will not qualify for more bailout money, and in turn default and leave the eurozone.
In Japan the government released data showing the economy grew a faster-than-expected 1.0% on-quarter in the January-March period, indicating a slow recovery boosted by reconstruction from last year's earthquake tsunami.
On currency markets the euro rebounded from Wednesday's sell-off, buying $1.2729 and 102.30 yen in early Asian trade on Thursday, slightly up from $1.2715 and 102.13 yen in New York late Wednesday.
Traders said they expected the rupee to fall further in coming days with risk aversion hitting global markets and sentiment souring over India because of its gaping fiscal deficit, slowing economy and political logjam.
The governmnent of India is planning to introduce some austerity to aid fiscal consolidation, finance minister Pranab Mukherjee said on Wednesday as the rupee slumped to a record low of 54.50 against the dollar and stock markets tumbled.
Mukherjee said he would take austerity measures to bring more fiscal discipline and send a right signal to the market.
"I am going to put in some austerity measures. It is important to send a right signal,” Mukherjee told lawmakers in the Rajya Sabha.
The Indian rupee took a severe beating and dipped to a record low of 54.50 against a US dollar. Rupee has weakened almost 10 percent since March.
This is the weakest level of rupee recorded so far. The earlier record low of 54.30 to a dollar was hit in mid-December last year.
The partially convertible rupee also hit a record closing low of 54.49 to a dollar. The rupee had closed at 53.78 against a dollar Tuesday.
Blaming the eurozone crisis for the economic slowdown, the sharp drop in the stock markets and rupee, Mukherjee asserted that India's growth story was intact and the government was taking measures to revive growth and attract overseas investments.
"Yes, we are concerned that our GDP growth has come down. It will be 6.9% in 2011-12, some are saying that it might be even low," Mukherjee said.
Replying to a debate on the Union Budget 2012-13 in the Rajya Sabha, Mukherjee said slowdown in economic growth was a matter of concern but there was no need to press the panic button.
"India's growth story is intact," he said.
Worries about Europe also spread beyond Greece. Spain's prime minister warned that the country, which is trembling under a 24.4% unemployment rate, could be locked out of international markets due to problems in the EU.
(With inputs from Reuters, AFP, PTI)