Indian shares on Tuesday bounced back from six-month lows hit in the previous session, led by IT and auto stocks, with sentiment turning positive as Asian shares rallied after all three major U.S. stock indexes hit record highs.
Asian shares were also lifted as crude prices touched their highest for the month after comments from Russian President Vladimir Putin raised the odds of a freeze in oil production.
The benchmark BSE Sensex was headed for its first gain in seven sessions, while the broader NSE Nifty was headed for its first winning session in four.
But analysts warned the gains were unlikely to last amid growing concerns that the government's shock move to remove higher-denomination banknotes from circulation would hit the economy more than expected.
"Right now, the markets are just easing up after yesterday's losses, but this is likely to change by the end of the day," said Mugilan K., deputy manager of research at Cholamandalam Securities.
"I expect Nifty to fall to 7,650 levels very soon and it could get worse. Don't expect any substantial upward movement at least until February next year."
The BSE Sensex was up 0.33 percent at 25,848.92 as of 0624 GMT, while the broader NSE Nifty was 0.46 percent higher at 7,966.
Both indexes had hit their lowest since May 25 on Monday, on worries sparked by Prime Minister Narendra Modi's demonetisation move.
Auto and IT stocks led the gains with Maruti Suzuki
A rise in crude prices also saw energy stocks gain with Oil and Natural Gas Corp
Among decliners, engineering company Larsen & Toubro Ltd