The blue chip stock, which has lost a fifth of its value since October, dropped more than 3% at one stage but later clawed back some of the decline as the wider FTSE 100 Index continued its bounce back, closing 60.4 points higher at 6796.4.
Yesterday's gains add to a 1% close on Monday, helping the top tier recover last month's hefty losses.
Early session trading was more lacklustre on America's Dow Jones Industrial Average as the market got off to a slow start following the long holiday weekend. In a quiet session for corporate updates, attention was focused on the UK economy after new figures showed inflation fell to 1.9% in January.
Experts believe the decline heralds the start of a run of below-target inflation in what will come as welcome respite for cash-strapped households.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, said low inflation should also act as a positive for shares.
He added: "Companies can more easily pass on the costs of slowly rising prices to their customers while investors are protected through rising dividends and share prices."
But with weaker inflation likely to help the Bank of England keep rates at their record low for longer, sterling came under pressure.
It narrowly held on to its recent four-year high against the US dollar, at 1.67 dollars, but fell a cent to 1.21 euros.
Centrica was in sharp focus after broker UBS added to the group's share price woes.
It has plunged in value as it faces up to Labour leader Ed Miliband's threat to freeze prices if he wins the next election and Energy Minister Ed Davey's recent questioning of its gas retail margin. Ahead of results on Thursday, which are expected to show flat operating profits for 2013, UBS weighed in with a sell rating based on expectations that Centrica's retail margins will fall to 4% in order to reduce political risk.
Shares dropped 4p to 314.4p, or 1%.
Alongside Centrica, the FTSE 100 fallers board featured InterContinental Hotels after the company posted a 10% rise in operating profits to $668 million (£400m) for last year.
Shares have enjoyed a good run in recent months, but were off 3% or 66p at 1981p on disappointment at the failure of the company to announce plans to return cash to shareholders.
Banking stocks were among the biggest gainers of the session, with RBS up 8.4p to 360.2p and Barclays ahead 5.3p to 261.3p.
And BHP Billiton added 37p to 1949p after the world's biggest mining firm reported a better-than-expected half year profit of $8.1bn (£4.84bn) as cost cuts offset lower commodity prices.