Earlier in the day, the 30-share barometer had plunged by 246 points to 19,963.12 points, a level last seen on October 9, 2013, in line with weak global markets.
However, late buying in bluechips, mainly banking, FMCG and telecom, helped the index bounce back from lows and closed marginally up by 2.67 points, or 0.01 per cent, at 20,211.93.
A sell off emerged in global markets due to fears of slowing economic growth after weak manufacturing data in China, the US and the UK.
Brokers said the MSCI Asia Pacific Index touched its lowest level in five months as weaker-than-expected growth in the US triggered a selloff in global markets.
The broad-based National Stock Exchange index Nifty closed down by 0.90 point at 6,000.90, after touching a low of 5,933.30.
In the 30-BSE index components, 16 gained and 13 ended lower while Tata Power remained unchanged.
Bharti Airtel was the biggest gainer among Sensex scrips rising by 3.43 per cent amid the ongoing spectrum auction. NTPC, Tata Motors, Coal India and SBI posted gains up to 3.37 per cent.
On the other hand, IT stocks TCS and Infosys were the market pullers which fell up to 1.89 per cent. Mahindra & Mahindra lost the most by 3.47 per cent among 30 Sensex stocks.
The banking sector index gained by 0.90 per cent to 11,659.04 followed by FMCG index by 0.78 per cent to 6,057.61.
The Power index rose by 0.70 per cent to 1,515.37 and auto index by 0.57 per cent to 11,415.92.