The BSE Sensex pulled back on Wednesday after sliding for five days in a row, bolstered by firmer Asian markets but investors were wary about sustaining the rise because of sluggish domestic growth.
The main 30-share BSE index was up 1.5 percent at 15,397.49 by 9:41 a.m. (0411 GMT), after rising more than 2 percent at the start.
There was some bounce back expected because it has been an oversold market, said Deven Choksey, chief executive of KR Choksey Securities. The long-term sustainability will depend on some concrete macro-economic policy measures which seems to be clearly missing, he added.
The benchmark index had fallen 5.2 percent over five days to its lowest close in 28 months on Tuesday, as slowing growth triggered foreign fund outflows.
Financial stocks led the bounce after the beaten-down bank index fell nearly 9 percent since the start of the month.
Banking stocks have been under pressure after the central bank took measures to stem volatility in the rupee, which could reduce local lenders' profit from currency-related fee income.
State Bank of India, the country's largest lender, was up 1.5 percent, while rivals ICICI Bank (ICBK.NS) rose 3.3 percent and HDFC Bank (HDBK.NS) firmed 2.2 percent.
The BSE index has lost about a quarter so far this year, making it the worst performing major market index globally. Foreign institutional investors have been net sellers of around $300 million so far in 2011, compared with a record investment of more $29 billion in 2010.
The cabinet agreed on Sunday to tackle widespread malnutrition with food subsidies for two-thirds of the country's 1.2 billion population, a move that may shore up support for the government but carries risks for the faltering economy.
Ranbaxy Laboratories (RANB.NS) fell more than 2 percent in volatile trade after the Indian drugmaker said it would make a $500 million provision in connection with a U.S. probe.
The stock initially rose 2.5 percent after the company reached a consent decree with the U.S. Food and Drug Administration.
The 50-share NSE index was up 1.6 percent at 4,616.5. In the broader market, there were more than 3 gainers for every loser, with 99 million shares changing hands.
At 0435 GMT, the MSCI's measure of Asian markets other than Japan was up 2.64 percent, Japan's Nikkei was up 1.33 percent and South Korea's Kospi was trading 3.09 percent higher.
STOCKS ON THE MOVE
* Tata Motors (TAMO.NS) rose as much as 3.6 percent , after a top executive said the company would increase output of light commercial trucks from its Pantnagar plant in North India by up to 90,000 vehicles a year from early 2012.
* Telecom network service provider GTL Ltd (GTL.NS) and group firm GTL Infrastructure Ltd rose more than 9 percent after the companies received final approval from lenders for restructuring loans worth 160 billion rupees.
TOP THREE BY VOLUME
* Jaiprakash Associates (JAIA.NS) on 6.9 million shares
* Suzlon Energy (SUZL.NS) on 4.1 million shares
* Tata Motors on 3.5 million shares