The BSE Sensex rose more than 1 percent on Tuesday as investors scooped up bargains, after the market fell 5.3 percent over four sessions.
Energy conglomerate Reliance Industries (RELI.NS), No. 2 lender ICICI Bank (ICBK.NS) and automaker Tata Motors (TAMO.NS) led the gains.
By 0538 GMT, the main 30-share BSE index was up 1.4 percent at 17,690.64, with all but three of its components rising.
The benchmark had fallen 2.7 percent on Monday, extending last week's 2 percent decline, which was its first weekly fall in 2012.
The index is up more than 14 percent since the end of December as foreign funds bought shares worth $7.1 billion on expectations the economy would pick up pace in the coming fiscal year that starts in April.
The market is again looking attractive after the recent fall, said R.K. Gupta, managing director at Taurus Mutual Fund.
Reliance Industries, which has the heaviest weight on the benchmark index, rose 2.2 percent, while State Bank of India (SBI.NS) climbed 1.95 percent and ICICI Bank gained 2.4 percent.
Tata Motors, whose products include trucks, buses, luxury brands Jaguar Land Rover and the Nano -- the world's cheapest car -- rose 4.5 percent.
Oil and Natural Gas Corp (ONGC.NS) was up 0.8 percent and GAIL India (GAIL.NS) rose 1.6 percent after a media report said the two state-run companies plan to offer $2 billion to acquire Africa-focused gas explorer Cove Energy (COVE.L).
Top software services exporter Tata Consultancy Services (TCS.NS) and No. 2 Infosys (INFY.NS) were down 2 percent and 0.46 percent respectively. India's $76-billion software service industry gets majority of its revenue from the United States and Europe.
The 50-share NSE index was up 1.49 percent at 5,359.95. In the broader market, there were about 5 gainers for every loser on a volume of 286 million shares.
Still, there were political and economic risks ahead, traders said.
The correction seems to be over for now though the market may not make much headway immediately and would be waiting for the state assembly election results and the budget, said D. D. Sharma, chief executive officer at brokerage Risk Capital Advisors.
The election results due on March 6 in five states of Manipur, Uttarakhand, Goa, Punjab and Uttar Pradesh would give an indication about the outlook for the Congress party, which heads the UPA coalition, before nationwide elections in 2014.
The government will present the annual budget on March 16 for the fiscal year 2012/13, amid slowing economic growth and mounting concerns about public finances.
Elsewhere, the MSCI's measure of Asian markets other than Japan was up 0.5 percent.
STOCKS ON THE MOVE
* Gitanjali Gems (GTGM.NS) rose as much as 3.2 percent after a top executive at India's largest jewellery retailer told Reuters the company was close to acquiring a jewellery retail company in China.
* Shasun Pharmaceuticals Ltd (SHAS.NS) rose as much as 5 percent after the company's board approved issuing up to 6.6 million shares, totalling about 500 million rupees, to Caduceus Asia Mauritius Ltd.
* GVK Power and Infrastructure (GVKP.NS) rose 4.4 percent after the Mint newspaper cited unnamed sources as saying the company is in talks with UK-based BG Group to sell stake in seven oil and gas blocks off India's west coast. Neither of the companies could be reached immediately for comment.
TOP 3 BY VOLUME
* Lanco Infra (LAIN.NS) with 24.7 million shares
* Suzon Energy (SUZL.NS) with 9.7 million shares
* IFCI Ltd (IFCI.NS) with 8.9 million shares