Fag end short-covering a day ahead of expiry of September derivatives contract also helped the index recover, said traders.

Shares from realty, capital goods, consumer durable, banking and auto sectors were at the receiving end while FMCG, pharma counters caught the attention as safe bets, they added.

The benchmark BSE Sensex initially touched a high of 26,844.70 but dropped to a low of 26,560, down by over 215 points when news of cancellation of coal blocks filtered in.

Later, it rebounded to settle at 26,744.69, showing a minor fall of 31 points or 0.12 percent. On Tuesday, it had fallen 431 points in line with global markets on growth woes.

Overnight heavy selling by foreign funds amid some weakness in global equities weighed on the market. FPIs/FIIs pulled out Rs 1,185.17 crore on Tuesday, as per provisional data with stock exchanges.

In a major blow to the corporate sector, the Supreme Court on Wednesday quashed allocation of 214 out of 218 coal blocks which were alloted to various companies since 1993. It also directed companies, which were allocated coal blocks but had not operationalised them, to pay a compensation to the government for the loss of exchequer.

Shares of Jindal Steel and Power Ltd closed sharply down by almost 10 percent. Bhushan Steel, SAIL, Tata Steel and Hindalco also ended down.

"Gradual recovery was witnessed in the index majors post a sharp fall due to SC coal verdict, which helped index to recover significantly from the day's low," said Jayant Manglik, President-retail distribution, Religare Securities.

The broad-based 50-issue CNX Nifty of the NSE also eased by 15.15 points, or 0.19 percent to 8,002.40. It had touched a low of 7,950.05 during intra-day trade.

Second-line stocks continued to bore the brunt of heavy selling by retail investors. The BSE-Smallcap and the BSE-Midcap indices closed down by 1.62 percent and 1.19 percent respectively, underperforming the Sensex.

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