The BSE Sensex closed 0.09 percent lower in choppy Wednesday trade, as Greece referendum talks and a contraction in German manufacturing stoked risk aversion, erasing early local gains from bargain buying following a two-day fall.
Investors largely preferred to stay on the sidelines and hoped for comfort on the weak U.S. economy and troubled euro zone from meetings of the U.S. Federal Reserve later in the day and Group of 20 (G20) leaders this week.
The main 30-share BSE index closed 15.98 points lower at 17,464.85, with half of its components in the red, dragged by losses in Bharti Airtel and ICICI Bank. It rose as much as 0.77 percent earlier in the day.
The benchmark, which is down more than 14 percent in 2011, has been battered this year as surging inflation and interest rates dimmed the growth outlook for the economy and corporate earnings. The global economic uncertainty has also pushed investors away from risky assets.
Ahead of the G20 summit, which begins tomorrow, markets would remain volatile and the volumes low. This will continue for some time, said K.K. Mital, head of portfolio management at Globe Capital.
Profit booking sent top telecoms firm Bharti Airtel shares down 2.56 percent, after having gained about 4 percent last week, while private-sector lender ICICI Bank fell 1.12 percent, after adding more than 7 percent last week. The world's largest two-wheeler maker Hero MotoCorp fell 2.25 percent after its October sales rose a mere 1.3 percent.
However, smaller rival Bajaj Auto closed up 0.3 percent after its October sales rose 7 percent from a year ago. Shares in index heavyweight Reliance Industries rose 1.3 percent as value buying emerged after the stock shed 4.4 percent in the previous two sessions. India's largest utility vehicles maker Mahindra & Mahindra rose 0.8 percent to 840 rupees after it posted a 20 percent rise in vehicle sales last month, shrugging off a series of interest rate rises.
The Reserve Bank of India (RBI) last month raised interest rates for the 13th time in a tightening cycle that began in early 2010, on expectations that persistently high inflation will finally begin to ease starting in December.
Top lender State Bank of India added 0.42 percent while No. 3 player HDFC Bank edged up 0.17 percent.
Banking stocks had taken a beating and since we are not expecting any further rate hike, the sector is recovering, said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries. The initial fall in the market (today) was a surprise and there is no reason why market should go back to 4,800 levels (Nifty) as positive sentiments are building, Nagpal added.
Construction firm Jaiprakash Associates rose 0.86 percent on attractive valuations while Larsen and Toubro ended flat. In the broader market there were 1.07 losers for every gainer on a moderate volume of 599.67 million shares.
The 50-share NSE index ended unchanged at 5,258.45 points. The MSCI's broadest index of Asia Pacific shares outside Japan rose 0.33 percent, while Japan's Nikkei slipped 2.21 percent.
STOCKS THAT MOVED
* SKF India rose more than 1 percent intraday, after its September quarter net profit jumped 36 percent. It gave up some ground and closed up 0.2 percent.
* SKS Microfinance closed up 1.33 percent after its board approved raising up to 9 billion rupees via qualified institutional placement.
* Piramal Healthcare added 1.44 percent after it settled a patent litigation with Baxter Healthcare for generic version of Suprane.
* Allahabad Bank jumped 8 percent after its second quarter net profit beat forecast and rose 21 percent.
* Merck fell 2.16 percent after its July-September net profit fell 19 percent.