The Bombay Stock Exchange benchmark Sensex, which had lost 114 points in the previous session, bounced back to close with a gain of 68.22 points at 19,046.54 after reports of a decline in food inflation trickled in.
Food inflation fell to 15.52 percent for the week ended January 8 from 16.91 percent in the previous week.
During the course of the session, the blue-chip barometer touched an intra-day low of 18,794.73 and a high of 19,100.26.
Similarly, the broad-based National Stock Exchange index Nifty rose by 20.55 points to close at 5,711.60 today, after moving between 5,729.45 and 5,634.50.
Banking stocks saw substantial buyer interest amid expectations of better Q3 earnings being posted by lenders and easing concerns over a steep hike in the central bank's borrowing and lending rates.
Banking stocks also picked up momentum in the last 30 minutes of trading on expectations of higher earnings growth, following a rise in interest rates and loan demand.
The banking index was the biggest gainer among the 13 sectoral indices on the BSE, rising by 1.75 percent to 12,264.88, followed by the information technology sector, which moved up by 0.96 percent to 6,705.14. The tech index also rose by 0.62 percent to 3,924.84.
However, a fall in the oil and gas sector index by 1.50 percent to 9,670.20 and the FMCG index by 1.36 percent to 3,582.27, capped the gains. The auto and realty sectors also ended in the negative zone.