The BSE benchmark Sensex on Tuesday surrendered most of its early gains to close just 33 points higher as profit-booking emerged in power and metal shares ahead of long holidays for markets, even as RBI kept interest rates unchanged.
Brokers said profit-taking by investors is likely to continue on Wednesday.
The 30-share barometer resumed slightly better and touched a high of 26,851.33 in the afternoon trade, a jump of 254.22 points from its previous close.
But soon profit-booking emerged, pulling down the key index index to 26,630.51, a small rise or 33.40 points or 0.13% from its last close.
The broad-based 50-issue CNX Nifty also firmed up by 8.90 points to 7,964.80.
"Some more selling pressure may be seen in the coming sessions, particularly in rate sensitive sectors. Also, as long market holidays are coming, investors prefer to book profits. In the coming sessions, global cues and second quarterly results shall be key triggers for market direction," said Rakesh Goyal, senior vice president, Bonanza Portfolio.
Brokers said local bourses were also impacted by weak trend on Asian bourses amid concern over tensions in Hong Kong and Chinese manufacturing gauge missing estimates.
Overall, 14 of 30 Sensex scrips closed with gains. Major gainers were Sun Pharma at 2.77%, HDFC 2.17%, Bajaj Auto 2.00%, Maruti 1.85%, Cipla 1.59%, RIL 1.35%, ITC 1.19 per cent.
BHEL dropped by 2.85%, Axis Bank 2.18%, Hindalco 1.69%, M&M 1.62%, Tata Motors 1.57%, Tata Steel 1.55%, ICICI Bank 1.52% and TCS 1.08%.
Reserve Bank Governor Raghuram Rajan in monetary policy meet today kept the key rates unchanged for the fourth consecutive timem citing continued risks to inflation and difficult external situation.
The short-term lending rate rate remained at 8%, and the cash reserve requirement of banks at 4%.
The statutory liquidity ratio has also been retained at 22%.
The Reserve Bank of India (RBI) retained growth projection for current fiscal at 5.5% and also said that future policy stance will be influenced by inflation outlook. It added that the pick-up in GDP growth during Q1 may not be sustained in the next quarters.
"Today not much movement was seen in the local equities as RBI credit policy announced was in the lines of expectation of the market.... Asian markets continued to trade weak on growing tensions in Hong Kong, which capped the gains in local equities," said Jignesh Chaudhary, Head Of Research, Veracity Broking Services.
Among BSE sectoral indices, consumer durables firmed up by 1.75%, healthcare by 1.35%, Oil&Gas by 1.14% and FMCG 0.66%, while realty dipped by 2.66%, Power 1.22%, Metal 0.96% and consumer goods 0.58%.
The total market breadth turned negative as 1,539 stocks closed in the red while 1,347 finished in the green. Total turnover was at Rs 3,820.54 crore.
Meanwhile, foreign institutional investors (FIIs), after a few days of selling, pumped in Rs 150.10 crore on Monday, as per provisional data.
Asian markets, expecting China and Taiwan which closed just in the positive terrain, finished in the red between 0.32% and 1.28%.
European markets were trading better in their late morning deals. The DAX and the CAC were up by 1.01% and 0.65% respectively while the FTSE was trading flat.