Mumbai: Stocks recovered their initial losses and select blue-chips even posted handsome gains lifting the Sensex by 71 points at close at the Bombay Stock Exchange (BSE) today on late short-covering by operators and fresh purchases by Foreign Institutional Investors (FIIs).

The BSE Benchmark 30-share Index which dropped to the intra-day low of 4759.35 at early stages, later staged a smart recovery and ended at 4889.00 as against yesterday's close of 4817.99, netting a gain of 71.01 points or 1.47 per cent.

The activity picked up in the second half of the session as FIIs, which expressed confidence in the economic reforms process after a meeting with Union Finance Minister P Chidambaram yesterday, made selective purchases in blue chip counters.

Operators too joined the bandwagon and were engaged in covering short positions at the prevailing price levels, brokers said adding, market participants still seemed to be cautious and preferred to maintain low profile until the government clearly spelled out its agenda on disinvestment, which is the one of the routes for foreign investments.

Initially, public investors booked profits in several counters despite positive FIIs inflows in the past four days and confidence shown by financial players and industry in the intent of the UPA (United Progressive Alliance) Government on carrying forward the economic reforms and maintaining growth momentum.

FIIs reported net investments of Rs 53 crore on June 2, taking the total inflow in four sessions since May 28 to Rs 528 crore.