Sensex edges lower; China slump weighs

MUMBAI (Reuters) - India's stock markets edged lower on Wednesday, tentatively heading for their second straight decline, as a steep fall in China's markets revived global risk aversion, while caution ahead of key corporate earnings results also weighed on sentiment.

China's share markets slumped 3.5 percent, the worst daily performance in five weeks, as a correction in small caps deepened through the day.

But analysts said they expected the recent momentum in shares to continue should earnings come in better than expected.

Wipro , Idea Cellular and JSW Steel are among companies due to report their earnings later in the day.

"Quarterly results for the first two week are quite encouraging. Though it is quite early to predict, if this trend sustains, we are looking at good earnings season on our hand," HDFC said in an email to clients.

The benchmark BSE Sensex was down 0.25 percent after rising as much as 0.5 percent before China's markets started their steep falls.

The broader Nifty shed 0.35 percent.

Indian markets will be closed on Thursday for a public holiday.

HDFC Bank Ltd , India's second-biggest private sector lender by assets, reported second-quarter results that met street estimates, but posted a higher-than-expected fall in net interest margins. The stock fell nearly 1 percent but pared losses as the session progressed.

Other lenders also fell, with ICICI Bank down 1.8 percent and State Bank of India lower 1.96 percent.

Meanwhile, Cairn India shares were trading flat ahead of the company's July-September earnings due later in the day.

But Bajaj Auto bucked the trend, rising over 3 percent after the company reported a 58 percent jump in quarterly net profit.

(Reporting by Karen Rebelo in Mumbai; Editing by Subhranshu Sahu)