The sharemarket has opened higher amid views that investors overreacted to Europe's debt problems with heavy sell-offs yesterday.

At 10.40am AEDT, the benchmark S&P/ASX200 index was up 26.3 points, or 0.52 per cent, at 5041.7.

The broader All Ordinaries index was up 25 points, or 0.5 per cent, at 5052.4.

Yesterday's falls in Australia were the heaviest of the year (above 2 per cent) but a relatively muted response in Europe to Cyprus' plans for a deposit tax suggested fears of that idea spreading to Italy and Spain were wrong.

IG Markets market strategist Evan Lucas said Australia and the Asian region had posted heavy falls yesterday in response to the Europe and US doing so on Friday.

Now there appeared to be "contrarian buying" as investors deciding some good quality stocks looked too cheap.