Auto and index heavyweights Reliance Industries and ITC were the top losers in early trades.
Gains in financial shares capped further downslide.
Markets recovered in late trades, amid firm European cues, led by rebound in financials and gains in IT shares.
The 30-share Sensex closed down 114 points at 28,622 and the 50-share Nifty ended down 37 points at 8,686.