Shares swung between small gains and losses in volatile early trading on Wednesday ahead of an expected hefty interest rate hike by the U.S. Federal Reserve to tackle inflation.
The NSE Nifty 50 index was down 0.14% to 17,792, while the S&P BSE Sensex was flat at 59,675.04 at 0445 GMT.
The Fed is set to announce its decision at the end of a two-day policy meeting later in the day. Rate futures traders are pricing in an 81% chance of a 75-basis-point (bps) hike and a 19% probability of a jumbo 100 bps increase. [FEDWATCH]
"We need to wait and watch the outcome of the Fed even though a 75 bps rate hike is discounted by the markets," said Anita Gandhi, director at Arihant Capital Markets.
"The undertone of the domestic markets still remains positive. The economy is back to normalcy and direct tax collections are pretty good. Freight and raw material costs have started coming down from peak. The impact of that will be seen in the next quarter," Gandhi said.
Meanwhile, India's government is in no hurry to push inflation - now hovering near 7% and eight-year highs - back to the central bank's 4% medium-term target, for fear that aggressive rate hikes could hurt economic growth, two sources with direct knowledge of the matter said.
The Nifty fast-moving consumer goods index was the top gainer among major sectors, rising 1%, while the bank index was the top drag, falling 0.6%.
Britannia Industries was the top gainer on the bluechip Nifty 50 index, up 2.3% and IndusInd Bank was top loser, falling 2.3%.
Among stock, shares of Central Bank of India jumped as much as 15% after the Reserve Bank of India took the state-owned commercial bank off its prompt corrective action list.
Shares of Swaraj Engines Ltd jumped about 14% after Mahindra and Mahindra on Tuesday proposed to buy a 17.41% stake of in the company from Kirloskar Industries.