Markets reversed early losses following gains in financial shares - HDFC, HDFC Bank and ICICI Bank. However, Japan's credit rating downgrade by Moody's continued to weigh on the markets.
The Nifty touched a low of 4,918 in opening trades and was trading flat, at 4,949, down one point and the Sensex was at 16,452, down 14 points.
Across Asia, markets reversed early gains after ratings agency-Moody's Investor Service downgraded Japan's credit rating from Aa3 to Aa2 due to a large buildup in government debt since 2009 and a high budget deficit. Japan's Nikkei Stock Average declined 0.5%, Hong Kong's Hang Seng declined 0.9% and China's Shanghai Composite was trading flat. Financial shares were leading the losses in Asia.
Overnight, Wall Street locked gains for the second consecutive day after recent data showed a weaker-than-expected housing market. The Dow Jones Industrial Average added 3%, the Nasdaq Composite Index and S&P 500 surged 3.4%.
All eyes are on Federal Reserve's monetary action; analysts expect Ben Bernanke to introduce some form of stimulus to bolster the ailing economy.
While another round of stimulus by Federal Reserve may bring foreign institutional flows back to India, macro-economic conditions continue remain a concern. Analysts advice investors to continue buying on dips. Motilal Oswal, CMD of Motilal Oswal Financial Services said, “There are two reasons — high interest rates and government inaction which are weighing on investor minds. But I think current levels provide a good opportunity to look at some of the large, reputed companies.” Oswal finds select auto, telecom and FMCG companies attractive in the current market.
BSE IT shares were leading the losses; the index was down 0.9%. Midcap IT stocks were the worst hit. Oracle Financial Services was down over 2%, Financial Technologies slipped 1.3% and Patni Computers was off 0.8%.
BSE Consumer Durables index was leading the gains, up 1%. Prominent gainers were - Titan industries up 1.5%, TTK Prestige added 1.3% and Blue Star was up 1.2%.
From the broader markets, the BSE midcap and smallcap indices were up over 0.6% each.
The top gainers on the Sensex were Cipla, up 1.2%, Bajaj Auto added 1.1% and DLF was up 0.9%. Other prominent gainers were Tata Power, down 1.6%, TCS declined 1.4% and Coal India was down 1.3%.
The market breadth was positive, 1021 stocks advanced for 447 stocks which declined.