After rising nearly 180 points in morning trade on firming trend overseas on Federal Reserve's upbeat outlook on US economy, the Sensex fell back to end 44.45 points, or 0.18 percent, at 25,201.80.
Intra-day, it swung in a 350-point range when it touched a high of 25,425.85 but fell to a week's low of 25,069.55.
The 30-share Sensex had lost 274.94 points in the previous session on rising crude import costs and weak rupee. Brokers said the market remained volatile as investors and foreign funds were adopting a cautious approach, amid concerns that rising global crude prices will fuel inflation and raise import bill and hurt country's economy growth.
A higher opening of the European market, helped select stocks to recover from day's low levels, they added.
Oil prices rose in afternoon Asian trade after Iraq's government appealed for US to carry out air strikes on jihadists who on Wednesday seized another oil refinery.
US benchmark West Texas Intermediate (WTI) for July rose 44 cents to USD 106.41 while Brent crude for August gained 18 cents to USD 114.44 in afternoon trade.
The broad-based NSE 50-issue Nifty, after rising to 7,606.45 at the outset, succumbed to selling pressure and ended 17.50 points or 0.23 percent, lower at 7,540.70.
"Domestic bourses were seen reacting positively to the dovish statement made by the Fed. But as the day progressed, negativity on global front due to Iraq turmoil dragged our markets down," said Jayant Manglik, President-retail distribution, Religare Securities.
Stocks of ONGC, India's largest state-owned oil explorer, plunged 5.13 percent, the most in three years, GAIL lost 1.88 percent, while RIL fell 2.38 percent, the most in a month.
Shares of state-run oil companies, HPCL plunged 3.97 percent and BPCL lost 4.67 percent.
Other laggards include Maruti Suzuki India which dropped by 2.48 and Hero MotoCorp by 0.52 percent.
However, gains in srips such as Infosys, ITC, HDFC Dr
Reddy's, Sun Pharma and Bajaj Auto trimmed Sensex's losses.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 366.18 crore on Wednesday.


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