On the options front, maximum Put open interest is seen at 10000 followed by 10200 strikes while maximum Call open interest is at 10500 followed by 10400 strikes.
Midcaps also participated in the correction as the Nifty Midcap was down 1 percent.
Gravita India, Dilip Buildcon, Graphite India and ITDC gained up to 7 percent while Central Bank of India, IDBI Bank, SBI and PNB were mildly lower.
Midcaps were off day's high in late trade, but still outperformed frontliners throughout the session. The Nifty Midcap index rose 0.4 percent and BSE Smallcap index gained 0.8 percent.
MMTC shares were up 19 percent as the board will consider bonus share issue next week.
Market breadth was balanced with advance:decline ratio at 1:1 which means both bulls and bears tried their dominance on D-Street.
Nifty Bank index was back above 200-DMA, recovering 360 points from day's low to end 113 points higher.
SBI, ICICI Bank, Axis Bank, Bank of India, Yes Bank, Andhra Bank and Canara Bank declined up to 3 percent.
According to Pivot charts, the key support level is placed at 10,376.87, followed by 10,326.93. If the index starts to move higher, key resistance levels to watch out are 10,477.67 and 10,528.53.
A 'Shooting Star' pattern is formed when the index comes under selling pressure as traders start booking profits as it emerges higher levels.
PSU banks, select private banks and oil marketing companies gained while technology and infra stocks were in the red.
TCS was biggest loser among Nifty50 stocks, falling more than 5 percent after big block deal.
Trends on SGX Nifty indicate a negative opening for the broader index in India, a fall of 16.5 points or 0.16 percent. Nifty futures were trading around 10,415-level on the Singaporean Exchange.
Midcaps also participated in the rally and recovered sharply from day's low, but still underperformed frontliners. The Nifty Midcap index was up 1 percent despite balanced market breadth.
United Spirits, MOIL, SpiceJet, Ashok Leyland, Castex Technologies, Reliance Communications, Adani Power, Gammon Infra, HDIL, Shree Renuka and Suzlon Energy gained up to 4 percent.
Auto and pharma stocks also caught in bear trap; but the buying in technology stocks and index heavyweight HDFC capped losses.
Amtek Auto, Castex Tech, REC and Religare Enterprises rallied 1-5 percent.
India VIX fell by 7.10 percent at 14.58 and the decline in volatility is supporting the index for a bounce back.
The 30-share BSE Sensex surged as much as 407 points intraday.
Midcaps also gained strength, with the Nifty Midcap index rising half a percent but still underperformed frontliners due to weak market breadth. About 1,507 shares declined against 1,189 advancing shares on the BSE.
Reliance Industries, HDFC, HDFC Bank, ICICI Bank, Infosys and L&T rallied 1-2 percent.
The Nifty50 is likely to open higher on Thursday tracking positive trend seen in other Asian markets. The index closed 95 points lower at 10,154.
Experts remained cautious on the market and advised buying quality stocks. They expect the volatility to continue in coming sessions.
PSU banks were worst hit, with the Nifty PSU Bank falling 3 percent while FMCG index outperformed, rising half a percent.
The Nifty50 is likely to open flat on Wednesday tracking muted trend seen in other Asian markets.