After having crashed by a huge 500 points at the start of the trade, the Sensex managed to recover lost ground and closed lower by only 144points, as domestic institutions heavily supported the markets.
The Sensex closed the day lower at 26,121 points, while the Nifty closed lower by 39 points at 7915 points.
The results of the Bihar elections spooked the market in early trade, as investors worried over the government's reform process initiative.
Pharma stocks were the clear losers in trade with Sun Pharma crashing a huge 6 per cent, following numbers that lagged estimates. Dr Reddy's also fell sharply by 3 per cent, following losses of 14 per cent seen on Friday. The losses were largely on the back of a warning issued by the US FDA to three of the company's plants.
PSU banking stocks had a good session in trade today with Allahabad Bank jumping 5 per cent, while State Bank of India, PNB and Bank of Baroda were the other gainers. The restructuring of Power discoms was largely responsible for the rally in PSU banking stocks.
Meanwhile, markets across Europe were trading with marginal losses, while most of Asia had a mixed session in trade. The Japanese Nikkei and the Shanghai Composite ended with goods gains, while other markets ended flat to negative.