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 Indian shares rebounded on Tuesday, in step with global stocks on easing U.S. rate worries, while investors kept tabs on the military conflict in the Middle East.

The NSE Nifty 50 index settled 0.91% higher at 19,689.85, while the S&P BSE Sensex rose 0.87% to 66,079.36.

High weightage financials and banks climbed over 1% each, while public sector banks rebounded from the previous session's loss, adding 2.08%.

Realty index climbed 4.01% and hit a record high following strong business updates from key constituents and the Reserve Bank of India's decision on Friday to keep rates unchanged.

Auto stocks added 1.24%, led by a 2.14% rise in Tata Motors after CLSA projected a rise in its fiscal 2025 profit.

The more domestically-focussed small- and mid-cap indexes outperformed the blue-chips, rising over 1.2% each.

"The outperformance of small- and mid-caps could continue further as earnings for September quarter are likely to be pretty good," said Atul Suri, chief executive of Marathon Trends PMS.

"Strong macroeconomic fundamentals and festive demand could support the shares," Suri added.

The International Monetary fund raised India's economic growth forecast for this fiscal to 6.3% from 6.1% earlier, citing stronger-than-expected consumption.

Meanwhile, military clashes between Israel and Hamas weighed on sentiment, prompting purchase of safe-haven assets like gold and the U.S. dollar.

"If the conflict between Israel and Hamas escalates to a point where it embroils major players like the U.S and Iran, it could disrupt oil supplies and spook markets," warned Rahul Sharma, head of technical research at Equity99.

Fed officials' dovish comments helped U.S. Treasury yields ease, triggering a recovery in global markets. [MKTS/GLOB]

Among individual stocks, Adani Ports climbed 3.73% on bullish views from CLSA and Motilal Oswal, while Coal India jumped 5.37% after Nuvama raised earnings estimates on upbeat volume growth outlook.