Bypass Redirect Rule which acts on user login, while logging through one time login link
Got answer for it https://drupal.org/node/480584 #25.
In brief the key was text comparison in the current page url to match if user/reset exists.

{ "rules_am_redirect_user_logins" : {
"LABEL" : "AM redirect user logins",
"PLUGIN" : "reaction rule",
"REQUIRES" : [ "rules" ],
"ON" : [ "user_login" ],
"IF" : [
{ "NOT text_matches" : { "text" : [ "site:current-page:path" ], "match" : "user\/reset" } }
],
"DO" : [ { "redirect" : { "url" : "user-home" } } ]
}
}