The Sensex made a smart recovery by rising 150 points to 35,415.03 in afternoon trade on sustained buying by domestic institutional investors and mixed Asian cues.
Meanwhile, the rupee recovered 15 paise to trade at 68.65 in the afternoon trade.
The 30-share Sensex bounced back by 150.62 points or 0.43 per cent to 35,415.03. It moved to the intra day low of 35,195.63 and a high of 35,430.15.
The gauge had lost 159.07 points in the previous session on Monday.
Sectoral indices, led by oil & gas, healthcare, IT, Auto, Teck and Realty, were in the positive zone, rising by up to 1.10 per cent.
The NSE Nifty went past 10,700-mark by rising 45.10 points or 0.42 per cent to 10,702.40 after moving between 10,630.25 and 10,708.05.
Sustained buying by domestic institutional investors and retailers mainly helped the key indices to recover from initial losses, broker said.
Prominent gainers included ONGC, Sun Pharma, Hero Motocorp, RIL, Tata Motors, Axis Bank, Bajaj Auto, TCS, Infosys, HUL, Bharti Airtel and Yes Bank, rising up to 2.60 per cent.
On the other hand, stocks of metal, power and capital goods and sectors traded lower by falling up to 0.38 per cent.
Meanwhile, domestic institutional investors (DIIs) bought shares worth a net Rs 366.94 crore, while foreign portfolio investors (FPIs) sold shares worth Rs 1,205.12 crore on Monday, as per provisional data.
Meanwhile, most Asian shares dropped as sentiment remained fragile in the face of tense trade relations between the US and major economies.
In the Asian region, China's Shanghai Composite index edged higher 0.14 per cent, while Japan's Nikkei fell 0.12 per cent and Hong Kong's Hang Seng shed 1.84 per cent in late morning trade.
The Dow Jones Industrial Average, however, ended 0.15 per cent higher in Monday’s trade.