Equity benchmark indices trimmed most of the early gains on Tuesday but closed in the green with no new escalation in the Middle East.
The BSE S & P Sensex closed 193 points or half a per cent higher at 40,869 while the Nifty 50 edged up by 60 points at 12,053.
All sectoral indices at the National Stock Exchange were in the positive zone with Nifty realty up by 1.93 per cent, metal by 0.7 per cent and pharma by 0.6 per cent.
But traders booked profit after reports emerged that the Iranian parliament has allocated 200 million euros to Quds to avenge Gen Qassem Soleimani's assassination. The move may add fuel to the US-Iran tensions which will be a major disappointment for stock markets across the globe.
Among stocks, mining and metal major Vedanta was star of the day with gains of 3.6 per cent at Rs 156.05 per share. Zee Entertainment added gains of 2.3 per cent while UltraTech Cement moved up by nearly 2 per cent.
Index heavyweight Reliance Industries ticked up by 1.7 per cent, HDFC Bank and Sun Pharma by 1.6 per cent each, NTPC by 1.5 per cent and Asian Paints by 1.3 per cent.
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However, Bharti Infratel slipped by 1.8 per cent while Bharti Airtel, Infosys, Bharat Petroleum Corporation and Power Grid Corporations closed about 1 per cent lower.
Meanwhile, Asian shares rallied with Japan's Nikkei gaining by 1.6 per cent, Hong Kong's Hang Seng by 0.34 per cent, South Korea's Kospi by 0.95 per cent and Shanghai Composite by 0.69 per cent.
Shares had fallen sharply on Monday as Iran and the United States traded threats after a US airstrike killed the top Iranian commander. The mood calmed a little as the session passed with no new aggression.