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Traders expect the Nifty to be rangebound between 5,170 and 5,340 for the next few sessions on worries that the UPA government may rollback some budget proposals, especially that of railways, due to pressure from its allies.
The expectations of a rollback in railway tariff hikes after Railway Minister Dinesh Trivedi's resignation are growing and underscore the government's political fragility hampering economic reforms.
If political and fiscal concerns were not enough, renewed concerns over China's economic growth are also weighing on the market.
Concerns about the scale of China's economic slowdown resurfaced as BHP Billiton, the world's largest miner, said it was seeing signs of "flattening" iron ore demand from the country.
The Nifty was last trading flat at 5,278.10.
Copyright @Thomson Reuters 2012