A spirited show by Tata Motors, Bharti Airtel and SBI coupled with higher opening in European indices helped the BSE benchmark Sensex recover from steep early losses it suffered on profit booking, but still closed 56 points down at 18,846.26, snapping a six-day winning run.
The Sensex, which had climbed to one-month high by rising 471.56 points in last six sessions, opened weak on Asian cues.
It quickly fell to the day's low of 18,736.45, down 166 points on overnight losses in the Dow Jones Industrial Average that slid 2.36 per cent, its biggest one-day drop in 2012, as investors focussed on US fiscal worries.
Brokers said the market entered a correction mode as investors booked profits after the recent upsurge.
ICICI Bank, L&T and pharma stocks Dr Reddy's and Sun Pharma saw losses after logging hefty recent gains.
However, the Indian stock market started recovering on heavy buying in Tata Motors, Bharti Airtel and SBI.
Tata Motors rose over 5 per cent on robust numbers from JLR while SBI over 1.3 per cent gained ahead of earnings. Bharti Airtel closed 1.9 per cent up after recent losses. With Europe opening higher on the approval of austerity package by Greece and hopes of more steps from European Central Bank in a meeting later today, the 30- hare Sensex finally closed at 18,846.26, down 56.15 points or 0.30 per cent from yesterday's level.
Fall in RIL, Infosys, HDFC, ITC and GAIL also weighed on the 30-share Sensex where 20 stocks declined while 10 rose.
"Weak international cues resulted in sharp a gap down opening for Indian markets. Although buying emerged and was sustained for the rest of the day, it was not able to bring the Sensex and Nifty into positive territory," said Milan Bavishi, Head Research, Inventure Growth & Securities.
The NSE 50-share Nifty fell back by 21.35 points or 0.37 per cent to 5,738.75.
Key Asian indices from China, Hong Kong, Japan, South Korea, Singapore and Taiwan ended with losses between 0.61 per cent and 2.41 per cent while those from Europe, the CAC was up by 0.32