Stocks held gains at a seven-month high, as engineering companies and automakers countered declines in software exporters.
Larsen & Toubro and Bharat Heavy Electricals, the nation's biggest capital goods firms, were the top performers on the S&P BSE Sensex. Hero MotoCorp rallied to its highest since December 2014, while ICICI Bank paced gains among its peers. Infosys slid for a third day.
The Sensex closed little changed in Mumbai, after swinging between gains and losses at least 12 times. The gauge rallied to its highest level since October on Tuesday after the central bank said it remains willing to cut rates as long as conditions allow, and as odds of a rate increase by the Federal Reserve this month decreased.
"The market's run has been superb and hence we are seeing a consolidation at current levels," R K Gupta, managing director of Taurus Asset Management Co, which has $590 million, said from New Delhi. "The markets are in a pause mode and waiting for the US Fed's meeting next week and the monsoon's progress."
India's monsoon reached the mainland in Kerala on Wednesday. The country is counting on above-normal rainfall this year to help control food prices, boost farm production and ease a drinking water shortage caused by back-to-back droughts.
Global investors are focused on central-bank and political events this month: the Fed announces its rate decision on June 15, a referendum on June 23 will determine Britain's membership in the European Union and Spain's general election is due three days after that.
Traders have cut back their bets for a Fed rate increase, now pricing in almost no chance of a boost in June, with odds for July down to 18 per cent from 53 a week ago.
Overseas funds have poured a net $471 million into local shares this month, exceeding $386 million of purchases made in May. That's helped the Sensex climb 1.3 per cent since June 1 after rallying 16 per cent in the last three months. The rally has sent the gauge's 14-day relative strength index to 71, a level some investors see as a signal that further gains may be capped.
Larsen & Toubro climbed to its highest level since October 21 and Bharat Heavy advanced 1.8 per cent to pare the year's loss to 28 per cent. Hero MotoCorp increased 1.3 per cent. Bharti Airtel rose one per cent after report the government may cut spectrum usage changes. ICICI Bank rose 1.4 per cent, adding to Tuesday's 4.4 per cent rally.
Infosys retreated 1.5 per cent, the worst performer on the Sensex, and HDFC Bank slid one per cent, the most since May 18. Asian Paints slid 1.2 per cent. Adani Ports & Special Economic Zone retreated one per cent.
