The 30-stock S&P BSE Sensex ended the session at 55,320.28, up 427.79 points on Thursday. The broader Nifty50 of the National Stock Exchange closed at 16,478.10 with a rise of 121.85 points.
Previously, the Sensex opened the day at 54,514.17 points and fell at least 54,507.41 points in the morning trade. The benchmark Sensex was trading at 55,010.89 points in the morning trade.
The Reserve Bank of India (RBI) on Wednesday raised the policy repo rate by 50 basis points to reduce inflation. This has dampened investor sentiment.
The rupee, meanwhile, fell 13 paise against the US dollar on Thursday, hitting an intra-day low of 77.81, weighed down by rising crude oil prices and sustained foreign capital inflows.