Indian equity benchmarks rebounded on Tuesday to recoup most of the losses in the past two days, helped by buying across most sectors. Gains in IT, metal, pharma and select financial stocks lifted the market, though losses in auto counters played spoilsport. Investors overcame fears that China's troubled property giant Evergrande could cause a spillover to the global economy, as investors' focus shifted to key central bank meetings this week.

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The Sensex index rose 514.3 points or 0.9 percent to close at 59,005.3 and the broader Nifty50 gauge settled at 17,563, up 166.1 points or one percent from its previous close. The 30-scrip index had shed 650.2 points (1.1 percent) in the past two days.

"The market witnessed a smart recovery on the back of a rebound in US futures and Europe markets... The Indian economy is showing a strong recovery with easing concerns about Covid infections. India appears to be a safer bet for foreign investors amid concerns in other emerging markets," Santosh Meena, Head of Research at Swastika Investmart, told CNBCTV18.com.

Among blue-chip stocks, top gainers were JSW Steel, ONGC, Bajaj Finance, IndusInd Bank, Tata Steel, Bajaj Finserv and ITC, closing between 3.3 percent and six percent higher.

On the other hand, Maruti Suzuki, Bharat Petroleum, Hero MotoCorp, Bajaj Auto and Nestle, ending between 0.9 percent and 2.5 percent lower, were the worst hit among the 10 laggards in the Nifty50 pack. Catch highlights of today's session here

Broader markets were mixed with the midcap index climbing up 0.6 percent. The Nifty Smallcap 100 gauge fell 0.1 percent. Oil India, Mindtree, Prestige, Gujarat Narmada and PVR were among the promiment gainers in the barometers, whereas CESC, Indiabulls Housing, Tata Elxsi, UTI AMC and Radico were the losers.

Overall market breadth was neutral with an advance-decline ratio of 1:1, as 1,616 stocks rose while 1,613 fell on BSE.

NSE's India VIX index -- which gauges the expectation of volatility in the market -- eased 5.6 percent to settle at 16.5, a day after surging to a three-month high.

All eyes are now updates from the Federal Reserve's upcoming policy meeting which begins later in the day.

"Global stocks recovered from the fears sparked by troubles in the Chinese economy ahead of the FOMC meeting," said Vinod Nair, Head of Research at Geojit Financial Services.

Investors the world over will closely monitor Fed Chair Jerome Powell's remarks as the US central bank is likely to lay the groundwork for an eventual tapering of its massive bond buying programme.

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Meanwhile, European markets rose in a rebound from their worst fall in two months the previous day, as concerns eased about a spillover from the crisis at China’s troubled property developer Evergrande. The pan-European STOXX 600 index was last seen up 0.9 percent.

ALSO READ: How Evergrande’s fallout can hit metal prices

S&P 500 E-Mini futures traded 0.9 percent higher, suggesting a strong start ahead on Wall Street.

Earlier on Tuesday, Asian markets were jittery amid thin trading due to holidays in China, Taiwan and South Korea.