Rupee, however, could not be saved of its morning blues entirely and ended 23 paise down at Rs 67.31 against the US dollar, although intervention by RBI in the forex markets helped its partly recoup the losses. The Indian currency had plunged almost one per cent or 61 paise to a low of Rs 67.69.
There have been concerns about a sharp plunge in stock and rupee valuations after Rajan made a surprise announcement over weekend that he would not take a second term at RBI.
Stock market benchmark Sensex plunged to as low as 26,438 points in pre-open trade between 0900-0915 hours, down nearly 200 points from its previous close, but early morning buying orders helped limit the opening loss at 178 points.
After touching a low of 26,447.88 in opening trade, the Sensex recovered sharply to scale an intra-day high of 26,885.49 points before finishing at 26,866.92, showing a gain of 241.01 points or 0.91 per cent.
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Marketmen said some big domestic institutions could have been pressed into buying to check the losses, as turnover was relatively higher in early morning trades for a Monday.
Seeking to allay concerns, government sources said a successor would be announced well in advance, preferably by July-end, to replace Rajan after he demits office on September 4 to help smoothen the transition.
Several prominent marketmen, including ace investor Rakesh Jhunjhunwala, said in their commentaries before and during the trading hours that Rajan's exit should not be a major worry for the markets as right policies are in place.
Moreover, in sweeping reforms, the government today decided to ease FDI norms in civil aviation, single-brand retail, defence and pharma by permitting more investments under automatic route -- a decision which some people said could have been advanced to counter Rexit jitters in markets.