Benchmark indices gained nearly one per cent on the back of a rally in heavyweight Reliance Industries Ltd (RIL) and banking stocks as the risk of financial contagion eased.

However, uncertainty prevailed among investors as they awaited the Federal Reserve’s interest rate decision on Wednesday.

Experts remain divided on whether the Federal Open Market Committee (FOMC) will go for a lower hike of 25 basis points or opt for a temporary pause because of the stress in the US banking system.

The 30-share BSE Sensex bounced back 445.73 points or 0.77 per cent to settle at 58074.68 after rising 504.38 points or 0.87 per cent during intra-day trades to 58133.33.

The broader NSE Nifty advanced 119.10 points or 0.70 per cent to settle at 17107.50.

These gains also followed an uptrend in global stocks as there was no fresh bad news from the crisis that began after the collapse of Silicon Valley Bank (SVB).

Indices in Asia such as the Hang Seng index rose 1.36 per cent, Kospi by 0.38 per cent, and the Shanghai index by 0.64 per cent. In Europe, the trend was positive with FTSE 100 index trading with strong gains of 1.70 per cent, the CAC by 1.81 per cent, even as the DAX was also up nearly 1.90 per cent at the time of writing this report.

“Global markets recovery ushered in gains in domestic equity indices as both the benchmarks ended above the psychological levels on the back of strong gains in financials. However, the optimism may face hurdles as the recent turmoil in large banks in the US and Europe has shaken investors’ sentiment,” Shrikant Chouhan, head of equity research (retail) at Kotak Securities, said.

Among the index stocks, it was RIL that led the list of gainers as it rose by 3.11 per cent to end at Rs 2,270.05. While the RIL share has underperformed the benchmark index in recent times, the rebound seen on Tuesday was following a CLSA report which said the share is available at a “bargain” now and investors should buy the stock.

The RIL share was followed by others such as Bajaj Finance, Titan, Axis Bank and IndusInd Bank which rose up to 2.88 per cent.

Power Grid, Hindustan Unilever, Tech Mahindra, Tata Consultancy Services, Infosys and Asian Paints were among the biggest laggards.

In the broader market, the BSE midcap gauge climbed 0.66 per cent, and smallcap index gained 0.50 per cent.

However, Siddhar tha Khemka, head of retail research at Motilal Oswal Financial Services, said investors should remain cautious as the markets are likely to remain volatile ahead of Fed’s meeting outcome on Wednesday.

He said the US central bank’s commentary amidst the ongoing financial crisis would be of key importance and can provide some direction to the markets.