The BSE Sensex and the Nifty are up around 1 percent, tracking a rebound in the rupee from a record low after the Reserve Bank of India's move to provide dollars directly to oil companies.
The BSE Sensex fell 3 percent while the Nifty slumped 3.5 percent over the previous two sessions.
Traders say continued foreign selling and expiry of August equity derivative contracts later in the day may increase volatility in the second half of trade on Thursday.
Foreign institutional investors sold about $1.12 billion worth of shares in the previous nine sessions through Wednesday.
State-owned oil companies gain after the central bank's move on Wednesday to provide dollars directly to these companies.
Indian Oil Corp Ltd (IOC.NS), Hindustan Petroleum Corp (HPCL.NS), and Bharat Petroleum Corp (BPCL.NS) each gain more than 1 percent.
Financial shares gain after steep losses in the previous two sessions are seen as overdone. Housing Development Finance Corporation Ltd (HDFC.NS) up 6 percent.