Firming trends on other Asian markets too buoyed the trading sentiments here.
The Sensex shot up by 295.96 points, or 1.77 per cent to 16,927.97 points in opening trade. It had lost over 566 points in the past two sessions.
The wide-based National Stock Exchange index Nifty also recovered by 87.15 points, or 1.76 per cent to 5,028.90.
Investors' confidence got a booster after the government said the Dubai crisis should not have any major impact on factors like employment and exports.
Stock brokers said the impact of crisis on domestic bourses would be short-lived as the exposure of the India and Indian corporate to Dubai is not significant.
Besides, fresh spell of capital inflows by foreign funds and selective buying by retail investors also influenced the trading sentiments, they said.
All the sectoral indices, led by realty and metals, were trading in positive zone with gains up to 2.54 per cent.
Reliance Industries rose 1.62 per cent to Rs 1,065.85, ONG Corp by 1 per cent to Rs1,179.90, Reliance Infra by 1.72 per cent to Rs 1,057, ICICI Bank by 2.46 per cent to Rs 872.20, HDFC Bank by 0.19 per cent to Rs 1,751, Infosys Technologies by 1.66 per cent to Rs 2,366.90 and DLF Ltd 2.27 per cent to Rs 358.55.
Meanwhile, the Hong Kong's Hang Seng was up 3.36 per cent, while Japan's Nikkei rose 2.75 per cent in the morning trade today.
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