South Korea's benchmark KOSPI index staged a rebound on Wednesday, recovering part of the losses suffered in the previous session when a steep sell-off in semiconductor stocks triggered the market's sharpest decline in months.

KOSPI closed 267.18 points or 3.26 per cent higher at 8,471.02. The gains were led by heavyweight chipmaker Samsung Electronics Co, whose shares surged 9.84 per cent. SK Hynix Inc also advanced 0.98 per cent.

The recovery came a day after the index plunged 910.71 points or 9.99 per cent to 8,203.84, marking its steepest single-day decline since March 4. Tuesday's sell-off was severe enough to trigger an automatic 20-minute trading halt across the exchange.

The recent sharp downturn followed heavy selling by overseas investors, particularly in semiconductor counters, after regulatory signals suggested concerns that the sector's rally may have become overheated.

KOSPI has become increasingly concentrated in the semiconductor industry, with Samsung Electronics and SK Hynix accounting for more than half of the index's total market capitalisation (m-cap).

On Monday, Lee Chan-jin, head of South Korea's market watchdog, said authorities may have moved too quickly in approving leveraged funds linked to some of the country's leading chip stocks. The products were introduced last month and are believed to have contributed to heightened market volatility.

Volatility may persist

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, "Excessive volatility will continue in semiconductor stocks and markets like South Korea and Taiwan. Sharp rallies will trigger profit booking, while sharp corrections will encourage buying. The profitability of these companies will continue to be excellent. However, concentration risks are high. This means high volatility will continue."

Back home, Indian equity benchmarks also recorded a sharp rebound during the session, supported by positive cues from Asian markets and a decline in crude oil prices following improved traffic through the Strait of Hormuz. Investor sentiment was further aided by growing expectations of an India–US trade agreement.