Sensex, which had tumbled 291 points yesterday to three month lows of 1,8861.54 on hike in taxes and FII concerns, opened firm and rose to an intra-day high of 18,988.97. It closed at 18,918.52, a gain of 56.98 points or 0.30 per cent.
On similar lines, the National Stock Exchange Nifty rose by 26.65 points, or 0.47 per cent to 5,719.70.
Finance Ministry earlier today sought to assure worried investors saying their concerns on TRC for claiming treaty benefits will be 'suitably' addressed during discussion on Finance Bill in Parliament.
"The markets were able to recover and gains ground once the clarity on TRC was received," said Milan Bavishi, Head Research, Inventure Growth & Securities.
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Meanwhile, good sales attracted investors to Maruti Suzuki that gained 5 per cent. Bajaj Auto and M&M also rose.
HDFC, L&T, HUL, Cipla, Jindal Steel gained 2-3 per cent.
Buying activity was seen in stocks of consumer durables, capital goods, auto and banking, while IT stocks like Infosys gained on weakening rupee. The domestic currency was last trading at 54.92 versus US dollar, up 1 per cent.
Stocks of RIL and GAIL declined while ONGC rose. Despite rise in Sensex, market breadth remained negative.
Support was seen after a HSBC survey said India Manufacturing Purchasing Managers' Index (PMI) was up by 54.2 in February against 53.2 in January. Globally, a better tend in the Asian region and higher opening in Europe further supported the domestic market.