Sensex, Nifty pause after two days of falls; financials top gainers

By Chandini Monnappa and Gaurav Dogra

(Reuters) - Indian shares traded flat on Friday after two straight sessions of sharp falls with gains in financials such as Housing Development Finance Corp and HDFC Bank offsetting losses in IT stocks.

Broader Asia was on the edge as weak U.S. economic data pushed investors to bet that the Federal Reserve could reverse its policy and start cutting interest rates before the end of this year. But nerves were soothed somewhat by news that the United States and China would hold vice-ministerial level trade talks next week.

"Indian markets have not fallen to a large extent today as we are awaiting fresh local cues and FII fund flow behaviour," said Deepak Jasani, head of retail research at HDFC Securities.

Foreign institutional and portfolio investors had offloaded equities worth a net $171 million this week as of Thursday.

The broader NSE Nifty was up 0.03 percent at 10,675.35 as of 0533 GMT, while the benchmark BSE Sensex was 0.04 percent higher at 35,527.10. Both indexes have shed about 1.5 percent so far this week.

Meanwhile, both indexes posted their worst three-day start to a year since at least 1996, according to Refinitiv data.

Investors were also cautious on Friday ahead of the corporate results season which is set to kick off next week. Top software services exporters Tata Consultancy Services Ltd and Infosys Ltd are scheduled to report their results for the December-quarter on Jan. 10 and 11, respectively.

"Earnings at a time when the country is awaiting elections will not have a very big impact, unless they are dramatically different from expectations. So, there will be muted impact of earnings and investors will watch the outcome of elections." Jasani said.

India's ruling party lost power in three key states in December, handing Prime Minister Narendra Modi his biggest defeat since he took office in 2014 and boosting the opposition ahead of national polls due by May.

Tata Consultancy Services and Infosys were the biggest drag on the Nifty index on Friday, declining 2.2 percent and 1.8 percent respectively.

Housing Development Finance Corp and HDFC Bank climbed 0.7 and 0.4 percent, respectively, and were the top gainers.

Debt-laden Jet Airways Ltd fell 3.64 percent to its lowest since Nov. 13.

(Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu)