The Sensex was trading higher by 166 points, while the Nifty gained 46 points in trade.
Among the top gainers in trade were the banking stocks that were hit badly after the RBI announced measures last week to curb volatility in the rupee. Banking stock gainers included Axis Bank, ICICI Bank and IndusInd Bank and State Bank of India.
Nifty stocks that lost ground were ACC, Ambuja Cements and Asian paints. Larsen & Toubro which dropped 7 per cent in trade on Monday following a poor set of numbers lost another 1 per cent in trade today. Reliance which fell post results on Monday saw some buying support at lower levels and gained 1 per cent.
ITC was subdued ahead of its results to be declared later this week. IT stocks which have been back in vogue following the superlative performance by Tata Consultancy Services gained ground in early trade.
Wockhardt which admitted to receiving a warning letter from the US FDA for one of its facilities in Maharsahtra and dropped 10 per cent on Monday recovered lost ground.
Meanwhile, markets in Asia were trading higher after weak U.S. home sales data helped boost sentiments raising expectations that the Federal Reserve won't pare down it's stimulus program anytime soon.