The rumours saw the 30-share BSE Sensitive Index rebound from its 52-week low of 2,951.45 to close at 3,078.51 points, registering a net loss of 64.59 points. The Nifty Index also plunged below the 900-point mark to close at 880.20 points, down 33.05 points.

During the day, however, the Sensex went on a roller-coaster ride, registering an intra-day fall of 192 points from the previous week's close of 3,143.10. This, according to market sources, was a reaction to the Moody's downgrade.

Aggressive buying by domestic institutions coupled with massive shortcovering provided the much needed support to the market at the crucial level of 3,050 points.

Sources explained the need for operators to cover their positions in the wake of the 50 per cent margin levied on stocks whichentered the no-delivery phase on the local bourses.

While Credit Lyonnais was rumoured to have made huge purchases at the counters of ITC, HLL and SBI, local institutions led by UTI also emerged as aggressive buyers, absorbing all the possible sales dumped at the specified group counters.

NSE figures on institutional purchases show that the local institutions and mutual funds have together bought stocks worth Rs 4.38 crore. FIIs continued to remain net sellers to the tune of Rs 5.21 crore.

"The market recovered on account of institutional support. However, our perception continues to be negative on the Indian markets," said S Subramanium, chief of dealing at UBS Securities, emphasising that the Moody's downgrade has in no way influenced their perception which was based on the union budget.

Reflecting the negative sentiment of the GDR market-makers, the Skindia GDR Index plunged by 6.89 per cent to close at 558.16 points at 12.15 GMT.

Even in a lacklustre trading environment, HDFC recorded a hugevolume of 36,500 shares traded on the trade-to-trade segment of the NSE at a price of Rs 2,600.

According to market sources, the deal, which was struck at a premium of 6.12 per cent over the prevailing market price of Rs 2,450, was executed in the form of a cross-deal between two FIIs.

Brokers attributed the rampant volatile movement in specified scrips to their being in the no-delivery period. ITC, which entered into the no-delivery phase on the BSE on Monday, attracted a backwardation charge of Rs 24 on account of the wide discrepancy between the closing prices at the BSE and NSE.

On the NSE, the stock witnessed wild swings on Monday. From an intra-day low of Rs 572, the stock surged by over 4 per cent to touch an intra-day high of Rs 635. However, in the final countdown the stock closed at Rs 632.20, registering a phenomenal volume of 55.57 lakh shares.

"Local institutions, banks and mutual funds need to make a concerted effort in salvaging the markets," said BSE director Jayesh Sheth.

The bigbull-favourites like Videocon International, Zee Telefilms, BPL and Pentafour Software continued to be locked at the lower end of the price band on the first day of the trading cycle on the BSE.