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 per cent, the DAX by 0.40 per cent and the FTSE by 0.23 per cent.
"Asian indices caught a flu as the US sneezed and they ended the day with deep cuts. A week-long conference to usher in China's next leaders and policies kicked off today, although as yet there was little clarity on content or timing of any announcements," said brokerage GEPL Capital.
Back home, experts said investors will digest the impact from the Cabinet today approving levy of about Rs 31,000 crore as one-time spectrum charge on all existing telecom operators.
The Cabinet also approved a proposal for disinvestment of 10 per cent of government equity in the next fiscal in aerospace firm Hindustan Aeronautics Ltd (HAL).
Major losers from the Sensex pack today were Tata Power (2.12 pc), L&T (2.04 pc), Gail India (1.98 pc), ICICI Bank (1.48 pc), Dr Reddy (1.35 pc), Hero Motocorp (1.27 pc), Jindal Steel (1.19 pc), Infosys (1.02 pc) and Sun Pharma (0.76 pc).
However, Tata Motors rose sharply by 5.52 per cent, followed by Wipro (1.97 pc), Bharti Airtel (1.90 pc) and SBI (1.32 pc).
Among the sectoral indices, the BSE-CG fell by 1.35 per cent, followed by BSE-HC (0.70 pc), BSE-Power (0.68 pc) and BSE-Oil&Gas (0.50 pc). BSE-Realty rose by 2.03 per cent and BSE-Auto by 1.01 per cent.
The market breadth today was negative as 1,462 shares ended with losses while 1,366 shares finished with gains.
The total turnover rose to Rs 2,606.97 crore from Rs 2,328.56 crore yesterday.
Foreign Institutional Investors (FIIs) bought shares worth a net Rs 728.45 crore yesterday as per provisional data from the stock exchanges.