Snapping 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 per cent 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 per cent to Rs 927.25 on BSE.
Cipla and Dr Reddy's surged by 1.79 per cent and 1.07 per cent, respectively. Lupin rallied by 2.59 per cent.
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 day's high of 28,021.39. The index finally settled 100.10 points or 0.36 per cent 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 per cent, at 8,495.15.
Of 30-share Sensex pack, 19 stocks closed in the green.
Major gainers included Wipro 2.14 per cent, Hero MotoCorp 1.82 per cent, Bajaj Auto 1.02 per cent, Infosys 0.97 per cent, ICICI Bank 0.96 per cent, RIL 0.88 per cent, L&T 0.75 per cent, ITC 0.59 and HUL 0.50 per cent.
However, Hindalco, SBI, Coal India and Axis Bank witnessed selling pressure.
Meanwhile, foreign investors sold shares worth Rs 255.42 crore, yesterday.
Sectorally, the BSE Healthcare index gained the most by rising 2.63 per cent, followed by consumer durables 1.39 per cent, IT 0.72 per cent and capital goods 0.51 per cent.
Broader markets too ended positive with small-cap and mid-cap indices rising by up to 0.24 per cent.
Mixed trend in other Asian and lower opening at European markets also influenced sentiment.