The 30-share BSE benchmark index recovered in the mid- afternoon trade as the government approved amendments to the PFRDA Bill 2011, agreeing with a proposal of 26 per cent foreign investment in the pension sector.
Sensex resumed lower at 16,872.30 and dropped to the day's low of 16,641.65. However, it gained some ground before closing at 16,775.87, down 106.80 points or 0.63 per per cent from its last close. It lost 686 points in the last four sessions, slipping below the 17k mark at over 3-week low.
Capital goods tumbled on fears that earnings in the sector will remain muted on sluggish economic growth, high interest rates and near double-digit inflation. Power equipment major Bhel and engineering & construction giant L&T hit 52-week lows.
"Heavy selling pressure was seen across all the sectors. Volatility in the European markets too aided the downtrend," said Shanu Goel, Senior Research Analyst at Bonanza Portfolio.
She added that sentiment continues to be jittery as the possibility of domestic economic slowdown has increased. Asian shares ended lower amid persistent worries over the euro-zone debt crisis. Key indices in China, Hong Kong, Indonesia, South Korea, Singapore, Japan, and Taiwan fell by by up to 2.48 per cent.