Indian stocks wiped out losses made in the last two days, with the benchmark BSE Sensex and Nifty gaining over 1 percent at 4 pm Wednesday.
Sun Pharma stock recovered with a 3.45 percent rise after its steepest plunge on record Tuesday following a profit warning. Hindustan Lever, down for the last two days after earnings turned out to be below expectations, also rose 3.48 percent and was among the top gainers along with Reliance Industries, Oil & Natural Gas Corp., Bajaj Auto and HDFC.
PVR's stock rose over 5 percent after it posted its highest ever quarterly profit following hits such as Tanu Weds Manu Returns, Avengers, Fast & Furious, Piku and Dil Dhadakne Do, which boosted multiplex ticket sales.
"Two days of correction. I think it was overdone and some amount of buying activity at lower levels," said Gaurang Shah, vice president at Geojit BNP Paribas. "Inflows by foreign and domestic investors are providing an excellent base, with every dip being bought into," said RK Gupta, managing director, Taurus Asset Management Co.
The rise in the stock market was helped by higher purchases in local stocks by overseas funds, which have bought a net $1.1 billion worth of shares this month. Other positive cues are improved monsoon rains and falling oil prices, which have increased the likelihood of a rate cut by the Reserve Bank next month.
Crude prices are down 11 percent this month, easing inflationary pressures in India which imports 75 percent of its oil requirements. A bad monsoon could also have played havoc with food prices, as half of India's farmlands rely on rains during the July-September months. But that has not happened so far, and rains have been normal despite forecasts to the contrary.
Credit Suisse said in a report that India's return on equity appears to have bottomed at 13.7 percent in March 2015, and has since risen to 14.1 percent. "A recovery from the current 14.1 percent ROE to 19.8 percent already appears to be priced in," said Sakthi Siva, Head of Asia Pacific Equity Strategy, Credit Suisse.
Among the laggards today was Cairn Energy, down 2.43 percent after it posted a 24 percent drop in first-quarter net income. TCS, Bharti Airtel and Infosys were also down.