Following mildly positive cues from the global markets, the Sensex opened with a positive gap of 105 points at 16,447. The index, however, soon slipped into the negative zone on the back of weakness in auto and banking shares.
The Sensex is now down 79 points at 16,263. The NSE Nifty has declined 18 points at 4,881.
Markets across Asia posted gains in the morning session following small gains on Wall Street overnight. Investor sentiment improved marginally as they hunted for bargain buys, all eyes are on Ben Bernanke's Speech on Friday this week. On Wall Street, the Dow Jones industrial average gained 0.3%, The Standard & Poor's 500 Index closed flat, up 0.03% and the Nasdaq Composite Index added 0.2%.
In Asia, the Nikkei Stock Average added 0.1%, Hong Kong's Hang Seng was up 0.2% and the Shanghai Composite surged 0.6%. China's HSBC Purchase Managers Index climbed to two month high of 49.8 in August from 49.3 in July.
Back in India, markets are expected to remain volatile on account of the futures & options expiry. Emkay Global Financial Services in the morning note said, Nifty rollover stood at 24%, three days before expiry in line with past average. High rollovers were seen in power and energy sectors.
"Markets may bounce to 5,100 and than correct again. The markets are in the hands of a few domestic and foreign institutional investors, while retail investors are just not ready to put money in the market," said Kishor Ostwal, MD, CNI Research.
Among the Sensex stocks - Coal India is the major loser, down 2.5% at Rs 386. Tata Motors, Wipro, Mahindra & Mahindra and Cipla are the other major losers. On the other hand, Jindal Steel, Sun Pharma and TCS are the other major gainers.
The BSE Auto and Bankex have declined nearly 1% each to 8,226 and 10,680, respectively.
The market breadth is fairly positive - out of 2,922 stocks traded so far, 1,803 have advanced and 1,018 have declined on the BSE.
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