Tracking positive global cues, the benchmark Sensex on Tuesday logged its first rise in three days, gaining about 299 points to end at 28,736.38 as a batch of tepid US economic indicators triggered hopes that Fed will not raise interest rates soon.
In a highly volatile session, initial sharp gains were almost washed out in late mid-session trade but the stock markets regained form on a sudden gust of fag-end buying.
Buying was seen mainly in pharma, capital goods, FMCG, consumer durables, refinery, metal and banking shares. Some of the IT and tech counters attracted profit-booking. Ten out of twelve BSE sectoral indices closed up.
Barring Hong Kong and Singapore which closed with nominal losses, other Asian markets closed higher on Tuesday as investors bet on the possibility that weaker-than-expected US data will prompt the Federal Reserve to adopt a cautious stance. If US raises rates, there is fear that emerging markets including India will see sharp capital outflows.
The dollar pulled back from a 12-year high against Euro ahead of Fed's two-day policy meeting starting later on Tuesday.
The S&P BSE 30-share Sensex resumed better and rallied further by over 345 points in early afternoon trade, but heavy selling pulled it down in the negative terrain momentarily to a low of 28,435.45. It rebounded in the last hour to settle at 28,736.38, gaining 298.67 points or 1.05%.
In the preceding two trading sessions, it had fallen by 492.70 points or 1.70%.
Similarly, the 50-issue CNX Nifty of the NSE rebounded by 90.15 points or 1.04% to 8,723.30.
Global markets generally are expecting the Federal Open Market Committee (FOMC), the Fed's policy arm, will remove the "patient" language regarding an increase in interest rates from its statement after a two-day meeting.
According to Fed data, manufacturing struggled in February, holding back overall industrial production that rose by a mere 0.1% in the month. Reports on homebuilder sentiment and regional manufacturing also were weaker than expected.
Fall in brent crude price and rise in rupee value also augur well for India and aided the rally.
Meanwhile, Foreign Portfolio Investors (FPIs) sold shares worth net Rs 762.55 crore on Monday, as per provisional data.
In Asia, key benchmark indices from China, Japan, South Korea and Taiwan finished higher by 0.28% to 2.14% respectively.
European stocks were trading mixed in their late morning deals as France's CAC and Germany's DAX declined while UK's FTSE rose by 0.43%.
Veracity Broking Services, Head of Research, Jignesh Chaudhary said: "To start the day, local indices opened positively as overnight US equities traded strong mainly after the disappointing data which may prompt Federal Reserve to delay the timing of interest rate hike. As the day progressed, it gained over one per cent."
As many as 23 scrips out of the 30-share Sensex pack ended higher. Major gainers were Hindalco (5.75%), Sesa Sterlite (4.02%), Dr Reddy's (3.66%), HDFC (2.62%), Tata Motors (2.47%), BHEL (2.25%), Cipla (2.11%) and L&T (1.93%).
Axis Bank (1.93%) Tata Steel (1.90%), Reliance Industries (1.76%), ITC (1.33%), M&M (1.18%), Sun Pharma (1.12%) and NTPC (1.03%) also notched up moderate gains.
Laggards included Infosys which fell by 1.10%, Coal India 0.78% and Tata Power 0.62%. Among the S&P BSE sectoral indices, Healthcare rose by 1.82%, Capital Goods 1.70%, FMCG 1.51%, Consumer Durable 1.47%, Oil & Gas 1.44%, Auto 1.22%, Metal 1.17%, Bankex 1.13% and Auto 1.22%.
Interestingly, total market breadth remained negative as 1,432 stocks finished with losses and 1,381 ended with gains while 126 held steady. The total turnover rose to Rs 4,019.96 crore from Rs 3,233.08 crore on Monday.