The markets turned buoyant after an initial hesitancy with the benchmark Sensex rising by 54 points in late morning trade on the back of selective buying by private mutual funds and foreign funds.
Reliance mutual fund and a US-based fund reportedly was making purchases in a few frontline stocks, brokers said.
The small-cap and mid-cap shares continued to attract heavy-buying interest at the current levels.
The Bombay Stock Exchange 30-share index recovered from its early lows of 15,706.22 and was quoted at 15,844.04 at 1030 hours, a gain of 53.53 points from its previous close of 15,790.51.
The broader 50-share S&P CNX Nifty of the National Stock Exchange also improved by 28.55 points to 4,775.60 at 1030 hours from its last close of 4,747.05.
The markets seem to be driven by fresh-buying support from institutional investors, particularly foreign funds which pulled out a large chunk of funds from Indian equity in the light of on-going credit crisis in the US, they added.
The International Monetary Fund has said weaker demand for Indian exports and high financing costs will lead to slower GDP growth of 7.9 per cent in 2008.