Indian banks and telecom stocks declined, while health-care and energy shares advanced as the benchmark gauge fluctuated after posting its biggest gain in five months.
The S&P BSE Sensex fell 0.2 per cent after rising as much as 0.3 per cent earlier Wednesday. The measure jumped 1.9 per cent on Tuesday, the steepest climb among Asian gauges, as global funds turned net buyers of domestic shares for the first time in five days and speculation grew that the Federal Reserve will boost interest rates in December then not rush further increases as the US economy remains mixed.
"After such a big move on Tuesday, the market is likely to take a breather," Rudramurthy BV, head of research at Vachana Investments Pvt, said by phone from Bengaluru. "The rally was due to short covering and buying from foreign and local institutions. Any decline from current levels is a good opportunity to buy." He is advising investors to buy lenders, automakers and oil companies.
Global funds bought Rs 345 crore ($52 million) of local stocks on Tuesday, according to provisional data from the exchanges. That followed withdrawals of $374 million in the previous four days, the longest stretch of outflows in more than three weeks. Local institutional investors bought net Rs 173 crore of stocks, extending five days of purchases, the data show.
Investors are also focused on the ongoing earnings season for clues if growth in profitability can justify the high valuations. Infosys Ltd. and Tata Consultancy Services, India's top software exporters, last week reported disappointing earnings outlook. Reliance Industries, the owner of the world's largest refining complex, is among companies due to report this week.
The Sensex trades at 16.5 times projected 12-month earnings, compared with a five-year average of 14.5 times. The MSCI Emerging Markets Index is valued at 12.5 times.