Sensex turns flat, defensives in limelight

Indian stock markets gave up some gains in the afternoon trade as investors remained cautious ahead of the Reserve Bank of India and the U.S. Federal Reserve's policy meetings.

The Sensex was up 45 points at 20,704. At its day's high, the Sensex had gained as much as 120 points. The Nifty was up 12 points at 6,167.

Most analysts except the Reserve Bank of India to hike policy rates tomorrow in the wake of November wholesale inflation touching a 14-month of 7.52 per cent.

Mayuresh Joshi, VP of institution at Angel Broking, said the RBI policy review and Fed decision would determine the course of the December series. Markets are pricing in a 25 bps rate hike from RBI but any increase higher than that could trigger a selloff, he added.

Defensive sectors such as IT, FMCG and pharma were among the gainers today as traders increased their position in these stocks ahead of the RBI and Fed meetings.

Ranbaxy and Cipla were up over 3 per cent while TCS rose nearly 1.8 per cent.

Asian shares pushed higher on Tuesday on the back of rising U.S. manufacturing output and a jump in euro zone business activity, ahead of a momentous U.S. Federal Reserve policy decision later this week.

However, investors remained on tenterhooks over when the Fed will start to reduce its $85 billion-a-month bond-buying programme, a major driver of global risk assets in recent years.

A majority of economists polled by Reuters expect the taper to happen in March, but a recent run of upbeat economic data has steadily shortened the odds on an announcement at this week's two-day meeting concluding on Wednesday - or in January.

"Although we have heavier odds pinned on the tapering being announced in January, we think the economic case has already been made for pulling the trigger," analysts at Societe Generale wrote in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent, facing resistance at its 200-day moving average. The index hit a three-month intraday low in the previous session. (With Reuters inputs)