The markets have started the trading session on a flat note with the Sensex and the Nifty swinging between negative and positive zone. The Sensex slipped 21 points at 16,841, and the Nifty was flat down three points at 5,113.
Overnight, US stocks took their cues from Europe's troubled debt markets on Tuesday, staging a comeback rally to end up more than 1 percent as Spanish bond yields came off euro-era record highs.
Asian shares rose on Wednesday, following gains in European and US markets where bargain hunters bought beaten down stocks, but markets remained vulnerable to the euro zone's debt woes as Spanish yields hit record highs on worries over banks.
Back home, traders would be watching out for the inflation data for May due Thursday, which together with the IIP data released earlier this week could prompt the RBI to slash key rates.
Shares of automobiles companies are under pressure in opening trades on reports that the government may impose a special tax on diesel cars.
Tata Motors, Mahindra and Mahindra and Maruti Suzuki India are down 1-2%.
Counters like Consumer Durable, Capital Goods, Oil & Gas and Banks declined marginally. However, BSE Healthcare, FMCG, Metal and IT indices have gained between 0.2-0.5%.
The top losers among the Sensex stocks were O N G C, Larsen & Toubro, HDFC Bank, Infosys and NTPC down 0.2-0.6%
Among teh gainers were Bharti Airtel, HUL, Tata Steel, Coal India and GAIL (India) up 0.6-1%.