Monday was the biggest intra-day drop in the BSE's history

The benchmark Bombay 30-share Sensex index closed at 10,823 points an increase of 341 points.

During trading on Monday, it had lost 1,111.71 points, its biggest intra-day drop, amid heavy selling by domestic and foreign funds.

The 10% drop forced trading to be suspended for an hour.

But despite many Asian markets sliding on Monday, the Bombay Stock Exchange bounced back spurred on by heavy buying by domestic investors, particularly mutual funds.

Monday's slump comes after the BSE fell by nearly 7% last Thursday and as stock markets were under pressure worldwide.

This year has seen the Sensex surging through the 10,000 points barrier in February and the 12,000 barrier in April.

Foreign investors have been pumping money into Indian companies, keen to take a share of its fast-growing economy.

They spent a record $10.7bn (�5.7bn) on Indian shares last year, encouraging Indian savers to push more of their money into equities.