The BSE Sensex, which plunged by 600 points in a knee jerk reaction to the BJP's Bihar loss in early trade, recovered some ground but still settled 144 points down at 26,121 as Arun Jaitley's remarks on reforms and Fitch's on the country's economic outlook soothed some nerves.
Weakness in the rupee, which slipped by more than 65 paise against the dollar, also kept the market mood cautious.
Shares commenced in the red on major sell-off following the BJP-led NDA's defeat in Bihar assembly polls, but revival of buying after Fitch said the verdict is unlikely to have any major implications on the economic front helped recovery.
Finance Minister Jaitley sought to separate the rout in Bihar from economic reforms and said that "structural reforms will continue".
Positive statements on election result from financial services majors including Citigroup, Nomura and Bank of America Merrill Lynch also helped dissipate some fears.
Citigroup said despite BJP's defeat it remains positive on India's economic cycle and the market.
Falling for a fourth day, the 30-share index after dipping below the crucial 26,000-level in opening trade to touch a low of 25,656.90 staged a comeback and closed 143.84 points or 0.55 per cent down at 26,121.40.
The gauge had lost 469.19 points in four trading sessions.
Shares of Sun Pharma emerged as the top loser among Sensex constituents by tumbling 5.82 per cent after the firm reported a 46 per cent dip in consolidated net profit.
The Nifty NSE, which slipped below the 7,800-level at the outset and hit a low of 7,771.70, bounced back at a rapid pace to touch session's high of 7,937.75 and concluded 39.10 points, or 0.49 per cent down at 7,915.20.
"Market was volatile with a negative bias as the Bihar election results influenced the sentiments of investors," said Vinod Nair, Head-Fundamental Research at Geojit BNP Paribas.
In overseas market, Asian stocks ended mixed after robust US jobs data bolstered expectations of a US Federal Reserve rate hike at its next momentary policy review in December.
Key indices in China and Japan rose between 1.58 to 1.96 per cent while indices in Hong Kong, Singapore, South Korea and Taiwan moved down by 0.42 to 0.75 per cent.
European markets were trading narrowly mixed as indices in France and Germany eased by 0.16 to 0.31 per cent while the UK's FTSE was higher by 0.28 per cent.
