Foreign funds sold shares net Rs 161.13 crore yesterday, as per provisional figures.
The 30-share Sensex resumed higher, but then dropped to 31,113.43 before hitting 31,126.90, down 0.09 per cent, at 1146 hours.
Gail India fell 1.73 per cent, as also Coal India, TCS, M&M and ONGC.
Overseas, Asian shares were trading lower in their morning trade, hit by fears of capital outflows in the wake of the US Fed hiking its interest rate. The ongoing US political turmoil also had a rub-off effect.
The Federal Reserve hiked the key rate by a quarter percentage point, showing confidence in economic revival.
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