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The Sensex and the Nifty rose on Wednesday after hitting a four-month low in the previous session as blue chips such as Tata Motors recovered on value-buying, though the outlook remained cautious given continued selling by foreign investors.
A slight recovery in the HSBC Services Purchasing Managers' index last month also helped improve sentiment, though the data out on Wednesday continued to show a contraction.
Still, the outlook remains cautious as Asian shares remain under pressure.
The Nifty rose 0.36 percent, or 21.50 points, to 6,022.40.
The benchmark Sensex rose 0.24 percent, or 49.10 points, to 20,261.03.
Foreign institutional investors sold shares worth $196.3 million on Tuesday, bringing their total over the previous eight sessions - or roughly since the start of the emerging market selloff - to $800 million.
"The outlook remains cautious as one cannot ignore that India is also an emerging market and we are not prone to what happens in other markets," said Kaushik Dani, a fund manager with Peerless Mutual Fund.
Among blue chips, Tata Motors (TAMO.NS: Quote, Profile, Research) gained 2.7 percent, adding to Tuesday's 2.8 percent rise after falling 12.9 percent in the eight sessions till Monday, while Tata Consultancy Services (TCS.NS: Quote, Profile, Research) rose 2 percent.
HDFC Bank (HDBK.NS: Quote, Profile, Research) rose 1.1 percent, while Coal India (COAL.NS: Quote, Profile, Research) ended 2.4 percent higher.
Ranbaxy Laboratories (RANB.NS: Quote, Profile, Research), India's biggest generic drugmaker by revenue, jumped 5.7 percent after it posted a narrower net loss in the latest quarter, helped by ramped-up sales of two acne drugs in the United States.
Tech Mahindra (TEML.NS: Quote, Profile, Research) gained 3.9 percent after its December-quarter profit rose more than three-fold to beat analysts' estimates.
Power Finance Corporation Ltd (PWFC.NS: Quote, Profile, Research) surged 5.5 percent after its December-quarter earnings rose 37.3 percent to 15.34 billion rupees, beating some analysts' estimates.
However, among stocks that fell, Reliance Infrastructure Ltd (RLIN.NS: Quote, Profile, Research) ended lower 1.2 percent on caution ahead of its December-quarter earnings on Thursday.
The stock was also weighed after the Delhi state government asked the region's power regulator to revoke the licences of two electricity distributors, run by the company, if they fail to supply power, drawing criticism from the companies.
