mumbai 09 10, 2012, 18:10 IST
The BSE Sensex ended flat on Monday as lenders such as SBI were hit by worries that continued delays in government fiscal reforms would contribute to stagnating growth and prevent the central bank from lowering interest rates.
The flat trading session tracked a day of flat to lower markets in Asia after China's exports last month grew at a slower pace than forecast while imports surprisingly fell. The data comes after weaker-than-expected U.S. jobs data on Friday.
India's economy is also stagnating at a time when high inflationary pressures is preventing the Reserve Bank of India from lowering interest rates. Few investors expect that to change next week when the central bank reviews monetary policy.
RBI officials have repeatedly pushed the government to take fiscal consolidation steps, but India has yet to take decisive action. The oil minister further raised investor skepticism after saying on Friday there were no immediate plans to raise fuel prices.
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However, on a more positive note, investors are hopeful the Federal Reserve would revive its asset purchase programme, potentially sparking increased demand for emerging market risk assets.
"Markets are just playing the waiting game of what kind of stimulus will come from the international markets and what kind of action it would have in the domestic markets," said Jagannadham Thunuguntla, Head of Research, SMC Investments and Advisors Limited
The BSE index rose 0.1 percent to end at 17,766.78 points, marking its third day of gains.
The 50-share NSE index ended up 0.09 percent at 5,363.45 points.
After gaining about 2 percent in a post-European Central Bank rally on Friday, Indian shares have stagnated for two sessions, including a special shortened one on Saturday when the Bombay Stock Exchange tested its disaster recovery software programme.
Investors are also growing cautious ahead of industrial output data on Wednesday, followed by inflation numbers on Friday. Both reports come ahead of the RBI's policy review on September 17.
Banks were among the day's leading decliners on Monday: ICICI Bank ended down 0.7 percent, while State Bank of India fell 2 percent.
Bharat Heavy Electricals fell 2.2 percent to its lowest close since July 2006 o n renewed concerns of coal block cancellations from the government's controversial sale process between 2004 and 2009.
Shares have dropped about 14 percent since mid-August, when the state auditor issued a saying the report had lost billions of dollars because of a flawed auction process.
Infosys rose 0.7 percent after announcing plans to acquire Lodestone Holding AG at an enterprise value of 330 million Swiss francs in cash.
Bharti Airtel rose 2.5 percent after Economic Times reported the company is likely to file a draft prospectus for a listing of its tower arm Bharti Infratel this week.
Tata Steel gained 1.3 percent after Citigroup upgraded the stock to "buy" from "neutral", citing attractive valuations.
Shares in Novartis India gained 4.4 percent ahead of a Supreme Court hearing on Tuesday that traders hope will deliver a favourable outcome.
The Indian unit of the Swiss drug maker Novartis AG is challenging the country's patent office decision refusal to grant a patent for its cancer drug Glivec.