Indian shares recovered on Tuesday, after two sessions of sharp declines, as oil prices eased due to a lack of further escalation in Middle East tensions.
The rupee was stronger on Tuesday after it rose 0.28% to 71.7275 against the dollar.
Oil surrendered some hefty gains as many doubted Iran would strike back in a way that would disrupt supplies, and its own crude exports.
Brent crude fell 44 cents to $68.47 a barrel by 0200 GMT while U.S. West Texas Intermediate (WTI) crude was at $62.86 a barrel, down 41 cents.
The price of oil surged in the last two trading sessions after a drone strike by the U.S. in Bhaghdad killed top Iranian military commander Qassem Soleimani, sparking fears of an escalation in conflict and supply disruptions in the region.
By 0432 GMT, the Nifty, which tracks blue-chip equities, was up 1.09 % at 12,124.75 while the benchmark Sensex rose 1.12% to 41,131.40
The spike in crude prices roiled Indian equities, with the Nifty falling just over 2% on Monday, recording its worst intraday fall since Sept. 3.
BSE lost 3.09 trillion rupees in market value, while NSE lost 3.05 trillion rupees in market value, as per Refinitiv Eikon data.
Some analysts were sceptical about the strength of the rally. "The kind of rally we are witnessing today, I don't think it will carry on. I think investors will take benefit of this and try to cut down on their position in the market," said Saurabh Jain, assistant vice-president at SMC Global Securities Ltd in New Delhi.
Asian shares also rebounded on Tuesday. Gold retreated to $1,557.54 an ounce, after scaling a near seven-year peak of $1,579.72 overnight.
Interglobe Aviation Ltd and SpiceJet Ltd rose 1.86% and 2.05% while shares of oil marketing companies also rose. Indian Oil Corporation was up 1.04% and Bharat Petroleum Corporation Ltd rose 0.81%.