Positive European indices, steep rise in crude oil prices and value-buying buoyed the Indian equity markets during the late-afternoon trade session on Wednesday.
The late surge in the markets came after panic selling and the dwindling rupee value had depressed investor sentiments during most of the day's trade.
Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) edged up by 177 points or 0.76 percent.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) traded in the positive territory. It was higher by 49.35 points or 0.70 percent at 7,097.60 points.
The Sensex, which opened at 23,237.23 points, traded at 23,368.72 points (2.45 p.m.) -- up 176.75 points or 0.76 percent from the previous day's close at 23,191.97 points.
During the intra-day trade, the Sensex touched a high of 23,381.89 points and a low of 22,920.84 points.
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Initially, both the indices of the Indian equity markets opened on a positive note, as a result of healthy gains made in the US markets on Tuesday.
Besides, a rise in crude oil prices, which climbed to over $30 a barrel (one barrel is equal to 159 litres), led investors to chase stock prices higher.
Notwithstanding the rise, caution selling and profit bookings on the back of rising non-performing assets (NPAs) levels of the banking sector dragged the markets lower.
Moreover, investors' confidence was eroded by the continuing conflict between the ruling NDA (National Democratic Alliance) and the opposition, which is seen as having a bearing on some key economic legislations that await parliamentary approval during the upcoming session.
The central government is expected to push through major economic legislations like bankruptcy code and Goods and Services Tax (GST) Bill during the upcoming Budget session.
In addition, a weak rupee dented the equity markets. The Indian rupee opened on a weak note, down 14 paise to 68.52 against a US dollar from its previous close of 68.37-38 to a greenback.
During the intra-day trade, the Indian rupee touched its lowest level since late August-early September 2013 at 68.67 level on spot.
"Indian rupee touched the lowest point since September 2013 as prices after opening around 68.50 levels on spot, went on to depreciate towards 68.67 levels on spot," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
"There have been reports of significant demand for vega-long strategies from custodian banks yesterday. It seems they have been able to anticipate the panic in domestic bond and equity markets."
Furthermore, the continued selling pressure from the foreign institutional investors (FIIs) dragged markets lower.
The data with stock exchanges showed that FIIs divested Rs.964.19 crore on Tuesday.
Investors were also seen cautious ahead of Federal Reserve's January meeting minutes which are expected to be released later in the day and the upcoming macro-data on German consumer confidence.
But, a positive opening to the European markets gave a boost to investors sentiments. Value buying was witnessed at the lower levels.
"Volatility dragged the equity markets down during the better part of the day's trade. It was triggered by caution selling and profit-bookings," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
"The slide in rupee's value too dented sentiments. However, positive European markets and value buying restored investors risk taking appetite."