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Benchmark indices Sensex and Nifty rallied nearly 1 per cent on Tuesday following gains in financials, auto and IT shares after recent sharp losses and positive global trends.
The 30-share Sensex spurted by 566.97 points or 0.87 per cent to close at 66,079.36 as 26 of its constituents ended in the green and four declined.
The index opened sharply higher by 400 points and gained further to touch the day's high of 66,180.17.
The broader Nifty of the National Stock Exchange jumped 177.50 points or 0.91 per cent to settle at 19,689.85, driven by gains in Coal India, Adani Ports and Bharti Airtel.
According to analysts, moderation in US bond yields on expectations that interest rates are likely to remain stable in the short term revived demand for rate-sensitive shares even as the Israel-Hamas conflict escalated.
Stock markets had dropped sharply on Monday with benchmark indices tanking up to 1 per cent as the attack by Hamas on Israel raised fears of a broader conflict.
"The Indian market completely recovered yesterday's losses, which were mainly due to the Hamas-Israel conflict.
"Moderation in crude prices and positive global cues on account of dovish remarks from Fed officials, which restrained US bond yields, aided the rebound," Vinod Nair, head of research at Geojit Financial Services said.
The domestic market's primary focus is currently on the approaching result season, with optimistic expectations on earnings, Nair added.
Among Sensex gainers, Bharti Airtel rose the most by 2.9 per cent. Kotak Bank jumped 2.15 per cent, Tata Motors by 2.14 per cent and JSW Steel by 2.09 per cent.
ICICI Bank, Axis Bank, Infosys, M&M, Tech Mahindra, Tata Steel, SBI and Maruti were also among the gainers.
On the other hand, IndusInd, TCS, Titan and Asian Paints declined.
Global markets advanced on expectations of stable interest rates.
In Asian trading, Tokyo's Nikkei 225 gained 2.4 per cent, the Hang Seng in Hong Kong rose 0.8 per cent, and the S&P/ASX 200 in Australia advanced 1 per cent.