Foreign portfolio investors (FPIs) sold shares worth a net Rs 402.62 crores, as per provisional data released by the stock exchanges.
Analysts said offloading of positions by traders, triggered by sufficient stocks on higher supplies from mills in the physical market against lower demand from bulk consumers, mainly led to the decline in sugar prices at futures trade.
The benchmark BSE Sensex rose by 116.51 points or 0.43 per cent to 26,769.32 in early trade.
The rupee on Monday had tumbled as much as 30 paise to end at 68.76. The US dollar index was quoted higher at 101.49 in late afternoon.
Traders attributed a mild recovery in gold prices to some buying by jewellers and retailers to meet ongoing wedding season demand but weak trend overseas capped the rise.
The NSE Nifty, after touching a high of 8,197.35, slipped to 8,128.70 before closing 15.25 points, or 0.19 per cent, higher at 8,142.15.
A major reason for the fall in the rupee was FII selling in India and other emerging market assets on rising expectations of a possible US interest rate hike in its next mid-December policy.
Forex dealers said a lower opening of the domestic equity market also weighed on the rupee but the dollar's weakness against some currencies overseas capped the fall.
The index had soared 456.17 points in the previous session after investors crated fresh long positions in the new December series amid the rupee rebounding from record lows.
"This week, key macroeconomic data will guide the market sentiments," said Vijay Singhania, Founder-Director, Trade Smart Online.
Not just wholesalers, but retailers and small traders are facing taxing times though they are still supportive of the government's demonetisation move.
Rupee closed up 0.4%, biggest gain since September 22
US markets remained closed on Thursday on Thanksgiving holiday and trading will end early on Friday.
The rupee has taken a battering as the demonetisation after-effect played out and concerns grew about a possible Fed rate hike in the near-term.
Nifty reclaimed 8,000-mark in early trade on Friday on fresh buying by investors as the December derivative contracts started on a better note amid mixed Asian cues.
Keeping a close watch … RBI will take appropriate action in case it is warranted: FinMin official.
The fall was attributed to the worries around the the government's demonetisation of 500 and 1000 rupee notes earlier this month to crack down on black money.
The rupee had shed 31 paise to clsoe at a new nine-month low of 68.56 against the dollar in Wednesday's session.
The 30-share index was trading lower by 145.97 points, or 0.56 per cent, to 25,905.84. The gauge had gained 286.67 points in the previous two sessions.
The Nikkei rose 1.0 per cent to 18,336.09 in mid-morning trade, extending its gains into a sixth day and is poised to post the longest winning streak since mid-July.
Foreign portfolio investors (FPIs) sold a combined of $3.18 billion in local equity and debt markets so far in November, putting severe pressure on the rupee.
The rupee ended lower by 9 paise on Tuesday at 68.25 -- its lowest in nine months -- on heightened capital outflows.
The NSE Nifty advanced 52.90 points, or 0.66 per cent, to 8,055.20.
The Sensex opened higher at 25,928.16 and hovered in a range of 26,039.70 and 25,765.51 before ending at 25,960.78, showing a gain of 195.64 points or 0.76 per cent.
The Sensex had lost 1,752.54 points in the previous six sessions.
Nissan Motor Co said it would suspend work at its engine factory in Fukushima at least until the tsunami warning is lifted. Its shares were down 1.3 percent.
While domestic cash crunch following demonetisation drive to curb black money played its part, the rupee volatility - which slid from initial gains - sparked intense selling pressure.
The benchmark Sensex on Monday crashed 385 points to hit a six-month low of 25,765.14 following sustained foreign outflows amid uncertainty about the economic impact of the demonetisation move.
The drop in coal stock is mainly due to increase in coal-based generation by 6.8 per cent during April-September 2016 period
On Friday, the rupee had lost 31 paise to end at 68.13 against the US dollar, the lowest closing since February 29.
The 30-share index was trading higher by 0.45 per cent, at 26,270.45 with sectoral indices led by oil & gas, metal and PSU leading the recovery.
The regulator plans to allow Foreign Portfolio Investors (FPIs) to invest in unlisted non-convertible debentures and securities debt instruments, they added.
Among other, BSE centres are available in Mumbai, Delhi, Chennai, Bengaluru, Goa, Guwahati Bhubaneswar Kochi and Dehradun.
USD demand from importers, corporates pressurised the domestic currency.
After spending two years in jail, Sahara chief Subrata Roy is currently out on parole. He was sent to jail on the orders of the Supreme Court in a long-running dispute with Sebi.
The NSE 50-share Nifty today moved lost 5.85 points or 0.07 per cent to end at 8,074.10.