Indian equity benchmarks ended nearly flat, tracking weak global stocks as investors mostly stayed on the sidelines ahead of the US inflation data release that would indicate the Federal Reserve policy tightening path.
After opening on a positive note, the market turned choppy through the session. The 30-share BSE index closed out Wednesday 35.78 points, or 0.06 per cent lower at 58,817.29 points, while the broader NSE Nifty gained 9.65 points, or 0.06 per cent to 17,534.75.
"Markets traded in a narrow range with a negative bias for most part of the trading session, as traders followed global direction and exhibited caution ahead of the key US inflation data," said Shrikant Chouhan, Head of Equity Research for Retail at Kotak Securities.
The market remained range-bound for the most part of the session as investors kept their exposure low due to weak global cues, traders said.
Bajaj Finance was the top loser in the Sensex pack, shedding 2.66 per cent, followed by NTPC, HCL Tech, Wipro, Asian Paints, Ultra Cement and SBI.
On the other hand, Tata Steel, Bharti Airtel, ICICI Bank, L&T and IndusInd Bank were among the gainers.
Nifty's metal index closed 1.62 per cent higher after scaling three-month highs earlier in the session.
Hindalco Industries closed 4.4 per cent higher and was the top Nifty 50 gainer. The aluminium and copper producer reported a near 48 per cent jump in quarterly profit.
State-run coal miner Coal India rose 2.1 per cent ahead of its quarterly earnings.
Nifty IT index, countering some of the gains, was the worst-performing sector and closed 0.89 per cent lower, suffering a second straight session of loss.
Among the Nifty 50 stocks, 30 traded in the green and the rest 20 in red, National Stock Exchange data showed.
Over the past month, Sensex and Nifty gained around 7 to 8 per cent each. Notably, the Indian stocks recorded their best weekly performance during the week to July 22 marking its best week since February 2021.
“The positive takeaway from today's trading session was that Nifty showed resilience to sellers as bulls' stepped-in after morning wobble taking the winning streak to three. Most importantly, bulls held to the reins – keeping weak Asian cues, inflation and recession fears at bay," said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.
Indian financial markets were closed in the previous session on account of Muharram. On Monday, Indian equity benchmarks had extended their gains after logging the third straight weekly rise, going against broader losses in world stock markets.
But on Wednesday, the trading pattern was a nervous calm as markets waited for signs that inflation eased in July despite last week's unexpectedly strong US jobs numbers.
For now, though, the market is pricing in a near 70 per cent chance of a 75 bps rate increase at the Fed's next meeting.
"I don't think that we are through the bear market woods yet – recession risks loom and I don't think the Fed is done with its aggressive belt tightening," David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco, told Reuters.
"I don't think markets have fully discounted these variables. This week's inflation data will certainly give us more clarity of the Fed's near-term policy outlook."
Europe's benchmark STOXX index fell 0.43 per cent, following a bigger fall of 1.2 per cent in the MSCI's broadest index of Asia-Pacific shares outside Japan, while Japan's Nikkei closed down 0.65 per cent.
US markets looked set to open broadly flat, with S&P 500 futures down 0.06 per cent.
The dollar was steady, having paused from a retreat that began in the middle of July. The dollar index, which measures the safe-haven greenback against six major peers, was at 106.3.
Analysts noted the US inflation data due Wednesday represent a lagging indicator that might not yet show inflation softening, and yield curves could flatten or invert further.
A flattening yield curve is usually seen as a sign of an economic slowdown and inversions as predictors of recessions. As measured by the gap between two- and 10-year yields, the U.S. curve is deeply inverted at below minus 40 bps.