The Bombay Stock Exchange benchmark Sensex rebounded to trade over 299 points higher in early trade on Friday on increased buying by funds, triggered by a sharp fall in inflation and overnight gains in the US markets.
Short-covering by speculators also supported the recovery in stock prices.
The bellwether index, which had lost more than 1,000 points in the past two sessions, rose by 299.78 points at 9,836.11 following surge in heavy-weight stocks.
The wide-base National Stock Exchange's Nifty, taking cue from the 30-share index, moved up by 90.35 points at 2,938.80.
Marketmen said sentiment turned better after inflation dipped from 10.72 per cent to a six-month low of 8.98 per cent for the week to November 1.
They said a strong rally in the US markets, where Indian companies' ADRs gained up to 18 per cent, and firming trends at other Asian bourses also buoyed the trading sentiment here.
Reliance Industries, gained Rs 23.95, or 2.06 per cent, at Rs 1,186.10, while banking major State Bank of India raised Rs 49.50, or 4.21 per cent, at Rs 1,225.00.
Besides, shares of BHEL, L&T, Reliance Infra, RCom, Bharti Airtel,
Satyam Computers and Wipro also moved up.
On Wednesday, the 30-share barometer had settled the day lower by 303.36 points at 9,536.33 after swinging wildly on alternate bouts of selling and buying.
The Stock market was closed yesterday on account of Guru Nanak Jayanti.
Meanwhile, US's Dow Jones Industrial Average closed 6.50 per cent higher yesterday, while Hong Kong's Hang Seng jumped 3.16 per cent, Singapore Straits Time gained 2.9 per cent and Japan's Nikkei traded higher 4.26 per cent in early session today.