The Sensex rallied 445 points from intraday lows to end on a positive note on Thursday led by gains in metal, oil & goods and power stocks.
The 50-share Nifty also recovered from the low levels supported by gains in Jindal Steel, Hindalco and Larsen & Toubro.
For the most part of the day the markets traded in the negative territory led by profit booking in financials and FMCG stocks. At one point the Sensex slipped over 200 points to hit low of 29,108.
Metal stocks helped recover Nifty from the low levels as they came in high demand in the last one hour of trade after some metal companies reported that they had won mines in the ongoing coal auction.
Naveen Jindal promoted firm Jindal Steel and Power said that it had won back some mines cancelled by the Supreme Court last year.
The Gare Palma IV/2 and three other coal blocks that Jindal Steel and Power won in the ongoing coal auction serve 50 per cent of the company's coal requirement, analysts say. Coal from these blocks will primarily be linked to JSPL's 1000 MW Tamnar-1 power plant in Chhattisgarh.
Shares of JSPL surged a massive 29 per cent to Rs 200.
Hindalco also advanced 3 per cent after the company said that it won Gare Palma-IV/5 mine in Chhatisgarh.
The ongoing coal auctions would help government in fetching approximately Rs 15 lakh crore which will help the government in improving its deficit situation.
From the Nifty basket, Sesa Sterlite, Larsen & Toubro, Hindalco, Mahindra & Mahindra, Tata Power, Tata Steel and BPCL also advanced 2-7 per cent each.
Meanwhile, the banking and FMCG stocks came under pressure owing profit-booking after a sharp upmove of past few days. The Bank Nifty slipped 0.6 per cent. Bank of Baroda, Punjab National Bank, State Bank of Inida, IndusInd Bank and ICICI Bank ended on a weak note.
Shares of most of the frontline cement stocks were weak today after Ambuja Cement reported less-than-expected profit in its fourth quarter ended December 31, 2014.
Shares of Ambuja Cement, Ultratech Cement, ACC and Grasim were trading weaker by over 2 per cent each.
The mid-cap and small-cap indices ended on flat.
The overall breadth turned marginally negative as 1,508 stocks declined while 1,380 stocks advanced.
The Sensex finally settled at 29,462, up 142 points and the Nifty gained 26 points to shut shop at 8,895.