The benchmark Sensex by midsession partially recovered to trade at 10,726.06 points, still lower by over 600 points, after suffering massive losses in early trade on reports of inflation declining and the Finance Minister P Chidambaram's soothing comments.

The Bombay Stock Exchange bellwether index, which tumbled by nearly 1,088 points in the opening session, recovered to trade at 10,726.06, a loss of 602.30 points at 1415 hrs. The key index touched a low of 10,239.76 at the outset.

The market recovered soon after reports came out that the inflation for the week ended September 27 declined to 11.80 per cent.

The wide-based National Stock Exchange index Nifty fell by 173.75 points at 3339.90 at the same time. It touched the day's low of 3198.90 during the day.

The Finance Minister said that the main problem is liquidity and the government would do everything to tackle it.

Chidambaram, whose statement was read by Finance Secretary Arun Ramanathan, said that World Bank has already stated that India was in a better position to weather the global storm.

Market crashed by nearly 1,100 points within minutes of opening but recovered substantially after the RBI move to cut the CRR to inject an estimated Rs 40,000 crore in addition to Rs 20,000 crore due to cut in mandatory deposit ratio by half a per cent on Monday.