Among stocks, Yes Bank added gains of 1.76 per cent at Rs 40.45 per share while Kotak Mahindra Bank moved up by 1.1 per cent and ICICI Bank by 0.6 per cent.
Banking and metal stocks were the worst sufferers. IndusInd Bank lowered by 4.13 per cent to Rs 1,420.40 per share after reporting deteriorating asset quality in third quarter results a day earlier despite 33 per cent jump in net profit.
Wipro gained by 1.4 per cent while HCL Technologies was up by 1.3 per cent. Sun Pharma, Cipla and Dr Reddy's ticked up by 2 per cent, 1.2 per cent and 1 per cent respectively. The other prominent winners were Britannia, Hindustan Lever and Kotak Mahindra Bank.
The BSE S&P Sensex closed 634 points or 1.55 per cent higher at 41,451 while the Nifty 50 moved up by 188 points at 12,214.
Besides, the GDP growth has been forecast to dip to an 11-year low of 5 per cent in the current financial year, mainly due to poor performance by the manufacturing and construction sectors.
Shares had fallen sharply on Monday as Iran and the United States traded threats after a US airstrike killed a top Iranian commander. The mood calmed a little as the session passed with no new aggression.
All sectoral indices were in the red with Nifty PSU bank falling by 3.8 per cent, metal by 2.6 per cent, auto and realty by 2 per cent each.
The heightened tensions sent investors scurrying for the safety of gold, which hit a near seven-year high, while oil jumped to four-month peak.
Most sectoral indices at the National Stock Exchange were in the positive zone with Nifty metal up by 0.52 per cent, IT by 0.39 per cent and realty by 0.2 per cent.
Reports said the White House's trade adviser said on Monday that the US-China phase one trade deal will likely be signed in the next week but the confirmation will come from President Donald Trump or the US Trade Representative.