The Bombay Stock Exchange benchmark Sensex recovered by over 175 points in early trade on buying by funds in frontline shares amid strong global cues on Wednesday.
The 30-share index rose by 175.23 points, or 0.86 per cent to 20,520.92 points with all the sectoral indices trading in the positive territory.
The index had lost about 10 points in the previous session after RBI hiked key short-term lending and borrowing rates by 25 basis points.
The wide-based National Stock Exchange index Nifty moved up by 48.95 points, or 0.80%, to 6,167.95 points.
Brokers said increased capital inflows by foreign funds into equities and firming trend in global markets helped stocks rebound.
They said expectations that the RBI's rate hike will not have much impact on economic growth also boosted the trading sentiment.
In Asian markets, the Hong Kong's Hang Seng Index was up by 1.69 per cent in morning trade. In the US, the Dow Jones Industrial Index ended 0.58% up on Tuesday.