Staging a spirited recovery, stock markets pared early losses to close higher on Thursday, with the benchmark Sensex rising by 185 points and the broader Nifty settling above 22,700 on strong value buying in IT and banking shares and a sharp rebound in the rupee.

Rebounding more than 2,000 points from the day's low, the 30-share BSE Sensex finally settled higher by 185.23 points, or 0.25 per cent, at 73,319.55. The index opened lower and tanked further by 1,588 points to hit a day's low of 71,545.81 in the first half of the session. Strong value buying in IT bellwethers like HCL Tech and TCS, and banking giants HDFC Bank and ICICI Bank, helped the barometer recover from sharp losses, hitting a high of 73,568.54 in the pre-close session.

The 50-share NSE Nifty followed a similar trajectory and closed above 22,700 at 22,713.10, up by 33.70 points, or 0.15 per cent. The index fell 496.85 points, or 2.19 per cent, in early trade before recovering to hit a high of 22,782.30.

A sharp rebound in the rupee after the Reserve Bank stepped in with a slew of measures to restrict banks from onshore forward markets also helped improve investor sentiment. The rupee rebounded by 188 paise to hit the 92 level against the US dollar briefly in the day trade before settling over 150 paise higher.

Bargain hunting in IT stocks supported the recovery, with HCL Technologies and Tech Mahindra ending nearly 3 per cent higher.

Infosys, Tata Consultancy Services, HDFC Bank, Bajaj Finance, Maruti Suzuki India, Titan, Axis Bank, Bharat Electronics Ltd, Kotak Mahindra Bank and ITC were the major gainers among Sensex shares.

On the other hand, Asian Paints, Eternal, Sun Pharmaceuticals, NTPC, Reliance Industries, PowerGrid, Mahindra & Mahindra, UltraTech Cement, Adani Ports, Bajaj Finserv and Tata Steel were the only laggards.

"Indian equity markets opened on the back foot as Trump's renewed threat to strike Iran 'extremely hard' swiftly erased the optimism built in the prior session, triggering broad-based selling across Asian markets," Vinod Nair, Head of Research, Geojit Investments Ltd, said.

The RBI's twin regulatory actions—capping banks' net open rupee positions and barring NDF offerings to corporates—though disruptive to banking operations in the near term, achieved their intended effect, mechanically forcing dollar unwinding and engineering a meaningful rupee recovery, Nair added.

US President Donald Trump, in his first national address since the Iran war began, said that the US will continue to hit Iran very hard. The United States will “finish the job” in Iran soon as “core strategic objectives are nearing completion” and military operations could wrap up soon, Trump said in his Wednesday night speech.

Crude oil spiked more than 7 per cent after Trump's speech. Brent crude, the global oil benchmark, traded 7.28 per cent higher at USD 108.52 per barrel.

Asian markets ended broadly lower, with South Korea's Kospi declining 4.47 per cent, Japan's Nikkei 225 falling 2.40 per cent, Shanghai's SSE Composite slipping 0.74 per cent, and Hong Kong's Hang Seng losing 0.70 per cent.

European markets were also trading lower, with Germany's DAX declining 1.71 per cent, Paris' CAC 40 falling 0.98 per cent, and London's FTSE 100 slipping 0.12 per cent.

The US market ended significantly higher on Wednesday.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 8,331.15 crore on Wednesday, according to exchange data. Domestic Institutional Investors (DIIs), however, bought stocks worth Rs 7,171.80 crore.

On Wednesday, the 30-share BSE Sensex jumped 1,186.77 points to settle at 73,134.32. The 50-share NSE Nifty climbed 348 points to end at 22,679.40.