Shares rose 1% on Tuesday, driven by gains in metals and auto companies, as investors used recent dips to enter the market, helping it to recover from three-week lows hit in the previous session.
Nifty was up 1.2% at around 17,530, in early trade, while Sensex gained 1.2% at around 58,660.
"The sharp pullback we have seen from 18,000 levels has encouraged people to be more risk-on," said Anand James, chief market strategist at Geojit Financial.
"Some factors, like the quantum of the US Federal Reserve rate hike going forward, is still on evolving stage," James said.
Nifty had lost more than 800 points after hitting a multi-month peak of 17,966.55 on 19 August in a span of six sessions.
"From here on, we will continue to see these kinds of blows between the bulls and the bears, as we assess the Fed trajectory," he said, adding that volatility had declined heavily.
The Nifty Metal rose 1.9%, while the auto index gained 2.2%.
"Globally, all countries are facing the churn and India seems to be the best placed jurisdiction in terms of growth and inflation outlook in FY23," Soumya Kanti Ghosh, group chief economic adviser, State Bank of India said in a report.
"We believe the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term."
In the benchmark Nifty, all 50 stocks traded in the positive territory.
Among individual shares, Shipping Corp of India rose 5% after a report said Indian government will likely fast-track disinvestment.