Indian benchmark equity indices recouped some lost ground from the previous session's sharp drop, boosted by a strong corporate earnings report. Still, caution prevailed ahead of the US Federal Reserve's meeting later in the day.
The 30-share BSE Sensex and the broader NSE Nifty settled in the green after flirting between gains and losses earlier in the session on Wednesday, and recouped Tuesday's losses, with both the indexes up about 1 per cent for the day.
The Sensex closed with gains of 547.83 points, or 0.99 per cent, at 55,816.32 and the Nifty ended at 16,641.80, up 0.96 per cent, or 157.95 points.
The recovery in stocks was also aided by investments in IT and financial companies.
The Sensex pack's top gainer was Sun Pharma, which soared 3.39 percent. State Bank of India, Larsen & Toubro, Asian Paints, TCS, UltraTech Cement, Bajaj Finance, and IndusInd Bank were the next highest gainers.
On the earnings front, the engineering company Larsen & Toubro (L&T) said on Tuesday that its consolidated net profit for the three months that ended on June 30, 2022, increased by 45% year over year to Rs 1,702 crore from Rs 1,174 crore.
Maruti Suzuki's shares increased by 1.62 per cent to Rs 8,660.05. Maruti Suzuki India Limited, the largest automaker in India, posted a standalone net profit of Rs 1,012.8 crore on Wednesday, representing an increase of 130 per cent over the same period last year, in part because of a low base.
Only five of 30 stocks that are part of the benchmark Sensex index closed in the red.
With losses of up to 1.32 percent, Bharti Airtel, Kotak Mahindra Bank, NTPC, Bajaj Finserv, and Reliance Industries were the worst performers.
"Nifty broke a two-day losing streak on July 27 ahead of the US Fed meet outcome in the evening. In the process, Nifty was one of the best performers in the Asian region," Deepak Jasani, Head of Retail Research at HDFC Securities, told PTI.
The Fed is largely anticipated to boost rates by 75 basis points later on Wednesday, with markets pricing in a 10 per cent probability of a higher increase and keeping an eye out for any shift in tone.
A cut to India's economic growth outlook by the International Monetary Fund (IMF) also dented sentiment.
In its World Economic Outlook update, the IMF cut India's growth rate for 2022 to 7.4 per cent from 8.2 per cent previously predicted in April, citing less favourable external conditions and more rapid policy tightening.
"Everyone is waiting with bated breath for the outcome of the Fed's meeting. While markets have discounted a 75 basis point hike, the key will be accompanying commentary and Chair Powell's replies on growth and inflation trajectory," Ajay Bodke, an independent market analyst, told Reuters.
"As seen in the IMF's latest growth outlook, the prognosis is that the slowdown is here to stay. A section of the market has already started looking at clues as to when the Fed will start cutting rates in 2023," Mr Bodke added.
Buoyant earnings from a raft of US and European companies helped steady global stock markets on Wednesday, cutting through recent gloom caused by rising interest rates and the threat of an energy crunch due to Russian gas supply cuts.
A pan-European equities index increased by 0.4 percent, while futures for the US S&P 500 and Nasdaq increased by 1 to 1.5 percent.
Gains of 4 per cent to 5 per cent on shares of Microsoft and Google parent Alphabet, which both anticipated good revenue growth and reported robust search engine ad revenues, improved Wall Street optimism.
In Europe, Deutsche Bank reported a forecast-beating profit rise as did Italy's Unicredit, boosting an index of European bank shares to a one-week high.
A range of sectors reported solid earnings too, from carmaker Mercedes Benz and luxury firm LVMH to energy firm Equinor and food producer Danone.
"Some great earnings numbers, especially from Big Tech and luxury goods," Vincent Manuel, CIO at Indosuez Wealth Management, told Reuters, although he noted the divergence between buoyant earnings and softer macro sentiment.
"The question is how long we will continue to see this divergence?"