Indian shares fell more than 2 per cent on Monday, with the broader NSE Nifty posting its biggest single-day percentage fall in over four months, after Chinese shares posted steep falls on the back of weak economic data.
The caution over global markets comes at a time when domestic investors are concerned about the weak state of India's corporate earnings.
UBS said corporate earnings consensus for FY16, FY17 and FY18 still looked optimistic, and expected about an 8 per cent cut to earnings forecasts this year.
Tata Consultancy Services will kick start the earning season on January 12.
"After the fall yesterday there is some amount of caution that traders are exercising," said Deven Choksey, managing director at KR Choksey Securities.
The Nifty was up 0.13 per cent at 0734 GMT while the benchmark BSE index was trading 0.07 per cent higher.
Gains were led by blue-chips stocks that fell on Monday. Reliance Industries rose 1.3 per cent after falling 2 per cent in the previous session.
Larsen & Toubro rose 0.76 per cent after losing 2.6 per cent on Monday.
But Mahindra and Mahindra trimmed gains to trade 0.6 per cent lower after the Supreme Court upheld a December ruling that temporarily banned the sale of large diesel cars in New Delhi. The stock rose as much as 2.37 per cent earlier.
Shares in Apollo Hospitals fell as much as 1.22 per cent on media reports that income tax officials had conducted raids on some of its offices.
© Thomson Reuters 2016