The BSE Sensex seesawed on Wednesday as profit-taking emerged after a two-day rally propelled the index up more than 3 percent, with investors wary about quarterly earnings that begin to roll out from next week.
High interest rates and sluggish consumer spending are expected to weigh on the results of many companies, while concerns remain about the impact of the euro zone debt crisis on the global economy.
The main 30-share BSE index was up 0.02 percent at 15,942.39 by 10:07 a.m. (0437 GMT), with half of its components rising. It rose 0.2 percent in opening deals and then fell as much as 0.3 percent.
There hasn't been any major change in the fundamental factors and therefore the market will continue to struggle to hold on to its gains, said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.
No. 3 lender HDFC Bank and top mobile operator Bharti Airtel (BRTI.NS) led the losses, falling 1.4 percent and 2.2 percent, respectively.
Bank of America Merrill Lynch said in a note it expected Indian shares to head lower in the first half of this year hit by slowing growth, worsening domestic macro fundamentals, deteriorating earning profile and sluggish global economy.
It said the market was likely to get slightly de-rated as the equity valuations are still at premium to its peers.
Nonetheless, we see the likely fall in equity prices as a 'big' trading opportunity, Vijay Gaba, equity strategist of the brokerage wrote in the report released on Tuesday. Though a new secular bull market does not appear to be in sight as yet.
The BSE index was among the worst performers in the world in 2011, falling 24.6 percent, with foreign portfolio investors pulling out $512 million, compared with inflows of more than $29 billion in 2010.
The market was battered last year as surging inflation and interest rates dimmed the growth outlook for Asia's third-largest economy and company earnings. The global economic uncertainty also pushed investors away from risky assets.
People are not expecting major positive trigger from the quarterly corporate numbers and that will lead to some weakness in the markets in the next couple of weeks, Mathews said.
Software bellwether Infosys Ltd kicks off the earnings parade on January 12.
Index heavyweight Reliance Industries was down 0.6 percent at 720.25 rupees on profit booking after the stock rose 4.6 percent in the last two sessions.
The energy major rose as much as 0.9 percent in opening deals after newspaper reports said the government had approved its $1.53 billion investment plan for developing four satellite fields in D6 gas block off India's east coast.
The 50-share NSE index was down 0.03 percent at 4,764.25 points. In the broader market, there were two gainers for every loser on relatively strong volume of more than 125 million shares.
Asian stocks rose on Wednesday, as investor risk appetite returned after upbeat U.S. and European economic data improved the global growth outlook despite deep-set worries over the euro zone debt crisis.
STOCKS ON THE MOVE
* TV18 Broadcast Ltd was up 8.5 percent at 36.50 rupees after its founder said the media company would focus on the profitability of its broadcast business and has no plans to invest further in it.
* Sobha Developers Ltd was up 1.3 percent at 201.90 rupees after the company said it was confident of achieving its guidance of annual new sales of 15 billion rupees.
MAIN TOP 3 BY VOLUME
* IFCI (IFCI.NS) on 5.1 million shares
* Tata Motors (TAMO.NS) on 4.4 million shares
* Unitech (UNTE.NS) on 4.3 million shares