Mumbai: The Bombay Stock Exchange benchmark Sensex on Thursday recovered from two-year low, gaining 158 points on fresh buying amid the settlement of monthly derivative contracts, easing food inflation and a firm trend in the European markets.

The Sensex, which had lost 365 points on Wednesday to touch two-year low, dropped further in the intra-day trade before making gains to close 158.52 points, or 1.01 percent, up at 15,858.49.

On the similar lines, the broad-based National Stock Exchange index Nifty shot up 50 points to 4,756.45, after touching the day's low of 4,639.10.

Brokers said apart from settlement in the derivatives segment and buying at lower levels that guided the sentiment throughout the day, upsurge was prompted by higher openings in Europe on indications that the euro-zone debt crisis may ease.

They said investor sentiment was also bolstered by food inflation falling sharply to 9.01 percent for the week ended November 12 from 10.63 percent in the previous week.

Besides, the recovery of the rupee from historic lows against the US dollar was another supporting factor for the market, they added. It rose for the first time in nine days following the flow of dollars in the financial system.

Auto, capital goods, healthcare and realty stocks were in demand. Of 30-BSE index scrips, 25 closed with gains while five remained in the negative zone.

Major contributors to the rally were Bajaj Auto, Bharti Airtel, BHEL, Infosys, L&T, M&M, Maruti, TCS and Wipro.