On the Sensex chart, Bajaj Finance, Bajaj FinServ, SBI, IndusInd Bank, Dr Reddy's, Tech Mahindra, ITC and Kotak Bank were the prominent gainers - rising up to 7.29 per cent. NSE Nifty climbed 102.40 points to end at 15,737.75.
This is the second biggest rise since September 21 last year, when rupee had gained by 93 paise, or 1.71 per cent.
IndusInd Bank was the top gainer in the Sensex pack, rallying over 7 per cent, followed by SBI, ICICI Bank, HDFC twins, Axis Bank, Bajaj Finserv and UltraTech Cement. NSE Nifty soared 245.35 points to 14,923.15.
The rupee ended lower by six paise at 65.73 against the US dollar on Monday.
Forex dealers said besides robust month-end demand for the American currency from oil importers, dollar's strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions, weighed on the domestic currency.
The local currency lost some of the gains after the forex market realised that RBI's decision would result in only up to $3 billion extra dollar supply in the market in initial stages.
Dealers said firm local equities amid sustained capital inflows limited the rupee's fall.
The big test will come at the end of March when the fiscal year ends and banks tend to hold on to cash.
'You can put 25 per cent right now; put another 25 per cent when Nifty corrects another 500 points.' 'At 13,500 put another 25 per cent and at 13,000 one can get fully deployed.'
The rupee had lost 52 paise to close at 54.08 against the dollar on Tuesday on heavy month-end dollar demand from importers and corporates.
Forex dealer said increased demand for the American currency from oil importers and dollar's gains against other currencies overseas mainly put pressure on the local unit.
The rupee also recouped against the pound sterling to end at 85.01 from overnight close of 85.15 and also rebounded against the Japanese yen to 67.04 per 100 yen from 67.38.
It touched a low of 53.16 on continued dollar demand from importers and some weakness in stocks in the initial stage.
Noting that Indian firms face a high risk of mark-to-market losses due to a volatile forex market, a brokerage firm has named telecom major Reliance Communications and auto giant Tata Motors among five blue-chip companies estimated to have suffered the most during 2008-09.
Forex experts said the dollar index, a gauge of six major global rivals, was marginally up ahead of US non-farm payroll data later in the evening while New York crude oil was quoting below USD 91 a barrel in Europe today.
The rupee had lost 8 paise to end at 55.44 against the dollar in Monday's session on fresh dollar demand from importers.
The Indian unit opened sharply higher at 64.80 as against Wednesday's closing level of 65.12.
The US dollar index was up by 0.16 per cent at 96.53.
Some weakness in the local stock market amid a rising trend pared rupee's early gains, forex dealers said.
The rupee rose by 7 paise to Rs 55.68 against the US dollar in early trade today on the Interbank Foreign Exchange as the American currency weakened against euro overseas.
Forex dealers said dollar selling by exporters and a higher opening in the equity market also supported the rupee.
The rupee on Thursday lost 25 paise to 55.72 against the US dollar in early trade at the InterbankForeign Exchange market as the American currency gained strength against other currencies overseas.
The domestic currency has fallen past the 56-level against the dollar after June 29.
The dollar strengthened against other currencies as well in the overseas market.
The rupee on Tuesday rose by 11 paise to 56.90 against the US dollar in early trade at the Interbank Foreign Exchange market as the American currency weakened against euro and other currencies overseas.
Rupee recovered sharply by 65 paise against the dollar in early trade on Monday on selling of American currency by banks amid expectations that Reserve Bank may announce steps to boost the local unit.
Forex trade can be a very profitable venture. But while the money market movements are small, they can hurt big.
Sentiments were weighed down as the US dollar turned higher against its major counterparts.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened lower at 56.02 as against its previous close of 55.64 on dollar buying by importers, mainly oil refiners, to meet their month-end requirements.
This marks a turnaround after rupee's 158-paise plunge in the last three sessions.
According to BofA-ML, the rupee volatility raises near term risk to inflation and to a rate cut this month.
The Indian rupee recovered by four paise to 54.99 after touching all-time low of 55.07 against the American currency in the late morning trade due to mild selling of dollars by banks following following measures taken by RBI to curb the local currency's fall.
Axis Bank was the top laggard in the Sensex pack, shedding over 3 per cent, followed by SBI, ICICI Bank, ONGC, HDFC and Kotak Bank.
PowerGrid was the top gainer in the Sensex pack, rallying over 6 per cent, followed by Maruti, ICICI Bank, HDFC, Kotak Bank, Axis Bank, and Reliance Industries.
IndusInd Bank was the top gainer in the Sensex pack, surging around 5 per cent, followed by Sun Pharma, Reliance Industries, Infosys, Kotak Bank and Tech Mahindra. On the other hand, HDFC, PowerGrid, Axis Bank, ICICI Bank, NTPC and L&T were among the laggards.
The Nifty-Sensex have recorded successive 52-week lows through the last week.
The fall in total reserves was mainly because of a decline in foreign currency assets worth $4.5 billion, the data showed.
Gold today zoomed by Rs 1,025, its second biggest rise this year, to Rs 28,990 per 10 grams, on brisk buying by stockists and investors amid a firming global trend and shifting of funds to the precious metal from volatile equity and forex markets.
The ECB on Thursday cut its main refinancing rate to zero from 0.05 per cent.
Barring bullion, all other commodity markets, stock markets, forex and money markets to remain closed on Tuesday on account of Ram Navmi.
