The BSE Sensex on Tuesday rebounded by over 277 points led by gains mainly in bank and auto stocks as participants hoped that the RBI will further slash its repo rate to lift sagging consumer sentiment.
Likewise, the Nifty too recovered from its five-month low level to settle around 86 points higher ahead of the RBI's policy outcome.
After swinging over 705 points during the day, the 30-share index closed at 36,976.85, up by 277.01 points, or 0.75 per cent. It hit a high of 37,241.77 and a low of 36,536.59.
The 50-share too Nifty ended 85.65 points, or 0.79 per cent, higher at 10,948.25 points.
Top gainers in the Sensex pack included Yes Bank, TechM, Bajaj Finance, Bharti Airtel, Maruti, Asian Paints and Hero MotoCorp -- rising up to 5.30 per cent.
On the other hand, PowerGrid, TCS, RIL, Tata Motors, Bajaj Auto, Vedanta, Infosys and ITC fell as much as 1.52 per cent.
"Markets gained strength on back of buying by investors ahead of key RBI policy announcement on Wednesday," said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers.
The Monetary Policy Committee headed by RBI Governor Shaktikanta Das on Monday started deliberations on the third bi-monthly policy review of the current financial year, amid expectations of yet another 25 basis points cut in lending rate to boost the slowing economy.
Besides rate cut, the industry also expects the six-member MPC to take steps to improve liquidity situation and also ensure transmission of rate cuts to borrowers by the banks.
Meanwhile, positive sentiment ahead of finance minister's meetings with industry leaders amid anticipation of steps to improve the state of the economy quickly too buoyed market mood here, he added.
Finance Minister Nirmala Sitharaman on Monday said she will meet representatives of various sectors and "fairly quickly" come out with steps to help them.
"Essential idea behind these meetings is to hear from them and fairly quickly after that come up with something which will help those sectors which are giving their views to us," she told reporters.
Elsewhere in Asia, Shanghai Composite Index, Hang Seng, Nikkei and Kospi ended in the red. While, equities in Europe were trading on a positive note in their respective early sessions.
On the currency front, the rupee also recovered by 7 paise to 70.80 in afternoon trade.
The global oil benchmark Brent crude futures were trading 0.48 per cent higher at 60.10 per barrel.