US bond yields also eased nervous sentiment as traders covered some of their bearish bets, pushing the markets higher.
NSE's Nifty rose 177.5 points, or 0.91%, to close at 19,689.85. BSE's Sensex climbed 566.97 points or 0.87% to close at 66,079.36.
Both indices had fallen over 0.7% on Monday as the escalation in geopolitical tensions in the Middle East resulted in oil prices surging.
«The global markets recovery and cooling off of US bond yields led to the recovery in Indian markets today,» said Siddhartha Khemka, Head of Retail research, broking, and distribution, Motilal Oswal Financial Services. «Some amount of short covering also helped the market to bounce back.»
Foreign Portfolio Investors net sold shares worth Rs1,005 crore on Tuesday, while domestic institutions were buyers to the tune of Rs1,963 crore.
Yields on US bonds dropped to 4.66% on account of safe-haven asset purchases by investors following the geopolitical tensions and remarks from Federal Reserve officials that the central bank may be closer to the end of its rate hiking campaign.
Elsewhere in Asia, most markets ended mixed on Tuesday with Hong Kong rising 0.8%, Taiwan advancing 0.41% and Indonesia ending 0.45% higher.
South Korea moved down 0.26% while China lost 0.70%. The pan-Europe index Stoxx 600 was up 1.55% at the time of going to print.
Brent crude futures were down 0.5% at $87.67 a barrel on Tuesday after gaining over 3% the previous day.
At home, Nifty Mid-cap 150 index gained 1.2% and Nifty Small-cap 250 rose 1.1% on Tuesday.
«Based on sentiment indicators like the US put-call ratio, which is at its highest since January and the momentum swing in India, the markets were oversold,» said Rohit Srivastava, Founder, Indiacharts, a