Snapping a two-day losing streak, the benchmark BSE Sensex rebounded by 100 points to 27,931.64 mainly driven by gains in export-focussed stocks including Sun Pharma, Lupin and Wipro on optimism that a weak rupee is likely to boost their earnings.
Sentiment also turned better on recovery in the Shanghai index, which settled in the positive zone despite falling more than 4% during the day.
In early morning trade, the rupee had weakened to around two-year lows at 65.40 against the greenback. Sun Pharma was the top gainer by climbing 4.32% to Rs 927.25 on BSE. Cipla and Dr Reddy's surged by 1.79% and 1.07%, respectively.
Lupin rallied by 2.59 %. The 30-share Sensex had opened lower at 27,721.25 on sustained selling pressure along with bearish global cues.
However, on the back of value-buying in blue-chip stocks, it staged a comeback to regain the 28,000 mark to touch the day's high of 28,021.39.
The index finally settled 100.10 points or 0.36% higher at 27,931.64. The gauge had lost 235.77 points in previous two sessions.
The 50-share NSE Nifty after reclaiming the crucial 8,500-mark hit a high of 8,520.45 and settled 28.60 points or 0.34%, at 8,495.15. Of 30-share Sensex pack, 19 stocks closed in the green. Major gainers included Wipro 2.14%, Hero MotoCorp 1.82%, Bajaj Auto 1.02%, Infosys 0.97%, ICICI Bank 0.96%, RIL 0.88%, L&T 0.75%, ITC 0.59% and HUL 0.50%.
However, Hindalco, SBI, Coal India and Axis Bank witnessed selling pressure. Meanwhile, foreign investors sold shares worth Rs 255.42 crore, on Tuesday.
Sectorally, the BSE Healthcare index gained the most by rising 2.63%, followed by consumer durables 1.39%, IT 0.72% and capital goods 0.51%.
Broader markets too ended positive with small-cap and mid-cap indices rising by up to 0.24%. Mixed trend in other Asian and lower opening at European markets also influenced sentiment.