The benchmark Sensex pared the early losses, by rising 126 points in the late morning trade after reports that the US government would provide Citigroup 20 billion dollars to protect the banking giant from the possibility of unusually large losses.

The Bombay Stock Exchange barometer, which opened lower by 206.36 points, bounced back by 126.81 points, or 1.42 per cent, at 9,042.02 points at 1045 hours.

The wide-based National Stock Exchange's Nifty rose by 46.90 points, or 1.74 per cent, at 2,740.35 after dipping to 2,641.65 in opening trade.

Marketmen said reports that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation reached an agreement with Citigroup to provide a package of guarantees to the struggling banking giant, helped stocks particularly of banking sector rebound.

The Treasury Department will invest 20 billion dollars in Citigroup from the 700-billion-dollar rescue package approved by Congress earlier.

Shares of country's largest state-run lender SBI rose by Rs 24.85, or 2.10 per cent, at Rs 1,208.