The tug-of-war between the bears and bulls, which had most institutions back the bulls, saw the Sensex rebound to close above the crucial barrier of 4,000 points, registering a net loss of 41.25 points over the previous close.

"Policital factors provided the much needed exit for the local operators to liquidate their long positions. The market has entered into the technical or trading zone," said Hemant Ashar of Gujarat Securities.

The upheaval in the indices was restricted to the Sensex, with the Nifty moving in a narrow band of 1,144.85 to 1,183.75 points, registering a net loss of 8.30 points to close at 1,173.80 points.

According to market sources, the timely intervention of UTI and Canbank Mutual Fund provided the base for a smart recovery of over 120 pointstowards the end of the trading session. The funds were reported to have bought chunks of MTNL, BSES, L&T, HLL and Bajaj Auto at lower levels.

"The market move was mind boggling," said a dealer at an FII brokerage firm. Continuous sales saw the Sensex breach the 4,000 mark during the first phase of the trading session, which unnerved market participants who rushed to square off their positions on the last day of the settlement on the BSE. However, according to a technical analyst, the 3,952 level is a crucial benchmark for the market, above which the index rebounded on account of institutional support.

Rumours that institutional purchases at lower levels could have been in the range of Rs 130-155 crore aided the sentiment of market participants.

Morgan Stanley was also reported to have bought huge chunks of select non-specified stocks like Alfa Laval, Boots, Bata and Bausch & Lomb which left a positive impact on the market sentiment.

"The correction of over 200 points has helped create short positionsin the market. This will help the market recover its lost vitality with the badla positions now under control," said a BSE broker.

Sources said the entry of Reliance and Tisco into the no-delivery period from April 28 on the BSE would swing the market back into action, considering the phenomenal volumes recorded at the Reliance counter in the week to April 24. The turnaround in the index was marked by volumes of over 2 crore shares registered in Reliance on the local bourses.

Most of the bank, pharma and software stocks also witnessed a smart recovery towards the last phase of the trading session. Satyam Computers, which emerged among the top five traded stocks on the local bourses, contributed a turnover of over Rs 174 crore, with the stock price appreciating by 1.91 per cent.

The panic in the market failed to influence the upward movement of Ipca Laboratories' shares. The stock was locked at the upper end of the price band on the BSE at Rs 159.40 and Rs 151.20 on the NSE.

The SBI counter registereda sharp recovery of 2 per cent from the day's low of Rs 286 to close at Rs 296 with a huge volume of over 44 lakh shares on the NSE and 27.60 lakh shares on the BSE.

Institutional support helped the MTNL counter regain its strength from the day's low of Rs 242 to close at Rs 252.30 on the NSE.