In line with global stocks that slumped after ECB did not announce immediate steps to tackle debt crisis, Indian shares tanked with the BSE benchmark index opening 60 points lower.
It immediately touched the day's low of 17,026.97, down 197.39 points from its previous closing.
However, a sharp bounce-back in European stocks boosted the sentiment and buying in Wipro, NTPC, Dr Reddy's and ONGC shares lifted the Sensex. It concluded at 17,197.93, down 26.43 points, on support from Reliance, Infosys and HDFC Bank.
European indices were trading higher with Germany's DAX up 1.95 per cent, France's CAC higher by 2.25 per cent and the UK's FTSE up 1.30 per cent in afternoon deals.
Meanwhile, the rupee also rebounded from session's low of 56.19 and was last trading at 55.9 tracking a rebound in euro.
Reports that India's crucial monsoon is expected to be 15 per cent deficient this season, the first indication of a drought in 3 years, worried investors.
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"If we factor in that agriculture which would not be strong... (growth) would be closer to 6 pc," said Planning Commission Deputy Chairman Montek Singh Ahluwalia in Delhi.
Metals stocks were the worst hit today with Sterlite and , Tata Steel losing 2 per cent each on reports of slower demand.
Traders said fears of drought hit interest-rate sensitive stocks such as banks as RBI may not cut interest rates. Auto stocks, including M&M and Tata Motors, also ended lower on apprehensions poor rains will hit rural incomes.
The 50-share NSE index Nifty declined 12.05 points, or 0.23 per cent to 5,215.70, after touching a low of 5,164.65.
Asian stocks showed a mixed trend after European Central Bank (ECB) disappointed markets with their policy stance. (MORE)