The Sensex did recoup about 200 points from the day's lows, but still ended weaker by 148 points at 16,936 and the Nifty shut shop at 5,091, down 47 points.
Ditto for the broader markets; the midcap index ended at 6152, down 41 points and smallcap index ended at 6865, down 33 points.
The benchmark indices saw a gap-down opening as the decline in US stocks and euro on Wednesday dampened sentiment post a buoyant session on Wednesday.
They slid further from thereon to retrace all the gains of the previous session before recouping part of their losses in the late-noon session. But the markets are not out of the dumps as yet in what is turning out into an unnervingly volatile week of trade.
The cause for the latest slump is the fading optimism that European leaders will make substantial progress on resolving the euro zone debt crisis at their summit meeting this weekend.
The Federal Reserve's Beige Book report suggesting the US economic outlook was barely growing in September also affected sentiment.
The Dow ended down 75 points and Nasdaq was down 54 points, just enough to send the Asian bourses into a tizzy of sorts. Hang Seng and Seoul shed around 2% each, while the Shanghai, Nikkei and Taiwan lost about a percent each.
There was no solace from the European front either, with the FTSE, CAC and DAX down about a per cent each in opening trades.
Sure enough, the ripple effect manifested itself on the markets back home. But a partial recovery across Europe saw a narrowing in the loss margin.
In macro-economic news, the food price index rose 10.60% and the fuel price index climbed 15.17% in the year to October 8.
In the previous week, annual food and fuel inflation had stood at 9.32% and 15.10% respectively. The primary articles index was up 11.18%, compared with an annual rise of 10.60%
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