Overcoming initial losses, the benchmark Sensex rebounded 82.10 points, while the broader Nifty recaptured the 8,200-level in late morning deals amid buying in IT, tech, realty, utility, power, finance, metal and banking sectors despite subdued global cues.
Hectic bargain-hunting amid short covering led the key indices back to green despite a weak trend at other Asian markets after the US Federal Reserve hiked interest rate indicating more to come next year.
The initial gloom seemed withdrawn as investors appeared to accept US Fed verdict.
The Sensex opened lower at 26,497.71 and dipped to a low of 26,407.58 before bouncing back at 26,737.86, it was quoting at 26,684.94 at 1100 hours, a gain of 82.10, or 0.31 per cent.
The NSE 50-share Nifty was also up by 27.10 points, or 0.30 per cent, at 8,209.55 at 1100 hours.
Major gainers were TCS 2.15 per cent, PowerGrid 1.65 per cent, M&M 1.40 per cent, Bajaj Auto 1.00 per cent and Tata Steel 0.67 per cent.
Meanwhile, foreign funds sold shares worth Rs 632.29 crore yesterday, as per the provisional data.
Overseas, Asian markets were trading lower as the dollar strengthened sharply and investors accepted Federal Reserve's first interest rate rise this year and its hawkish rate outlook for 2017. Hopes were also high that higher interest rates in US would attract foreign investments from emerging markets towards the US.
US stocks ended lower after a volatile session yesterday, as investors grappled with the prospect of a faster pace of rate increases in 2017 than had been previously forecast.
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