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After battling sharp intra-day choppy trading session, key local equity benchmark indices clawed back into positive territory and snapped a three session fall with benchmark Sensex managing to sneak past the 26,000-mark at close on short-covering in rate-sensitive stocks.

Recovery in Indian stocks received a major boost from the strong European markets where key indices were up over 2-3 percent in intra-day trade after the yesterday's freefall.

Tuesday, the 30-share BSE S&P Sensex ended at 26,032.38, up 290.82 points, or 1.1 percent from previous close. Market sentiment improved sharply in late trades but not before witnessing a sharp 826 points intra-day volatility. After a gap up of 174 points, the Sensex rallied further tracking recovery in other Asian indices and surged nearly 400 points to touch a high of 26,124.83.

However, markets soon turned volatile and with key indices in China & Japan taking a severe pounding, the index, too, shed all its gains and touched the day's low of 25,298.42. down 444 points. In addition to Monday's 1,624 points fall, the Sensex in last three sessions plunged by more than 2,000 points amid weak global markets sentiment.

Despite the recovery, market breadth ended weak with 1,506 stocks declining against 1,214 advances on BSE.

Post the market close, China's central bank announced cut in bechmark interest rate with effect from 6 September, the fifth straight cut since November. The rate cut move is probably aimed at propping up its wilted market. However, Chinese markets ended mixed, with Shanghai Composite Index crashing by another 7.6 percent, while Hang Seng eked out a small 0.7 percent gain.