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Markets have extended gains with Sensex trading above 20,700 mark and Nifty inching towards 6,200. A bout of volatility was witnessed in early trade as the benchmark indices reversed initial losses.
By 10:20, the Sensex was higher by 88 points at 20,700 mark and the Nifty has gained by 27 points at 6,166 levels.
Investors remain cautious ahead of the Reserve Bank of India's (RBI's) mid-quarter monetary policy review today and the central bank's guidance will be in focus.
Most analysts expect the central bank to lift the repo rate by 25 basis points to 8%, its third consecutive rate hike, after both consumer and wholesale prices surged last month.
On the global front, Asian shares tiptoed higher on Wednesday as investors waited to hear when the U.S. Federal Reserve will begin unwinding its stimulus campaign, a major driver for global risk assets in recent years.
On Tuesday, a better-than-expected report on U.S. house builder confidence and inflation data suggesting low but stable price growth, supported the view that economic conditions are adequate for the U.S. central bank to start scaling back its $85 billion monthly bond-buying.
MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.2%, though still faced resistance at its 200-day moving average. On Tuesday, it trimmed early gains to end flat.
Japan's Nikkei share average, spurred by buying from hedge funds, climbed 1.5%, extending Tuesday's rebound from a sharp loss in the beginning of the week.
Back home, the rupee was trading higher ahead of the RBI's rate decision at 11 am. Rupee was at 61.90/91 versus 62.01/02 close on Tuesday.
RBI is likely to hike key policy rate by 25 bps to 8% to tackle inflationary pressures.
On the sectoral front, BSE Capital Goods, Consumer Durables and Healthcare indices have gained by 1% each. However, BSE Metal and FMCG indices are trading marginally lower.
Capital goods majors have edged higher in early trade. BHEL is the top Sensex gainer, up over 2%. L&T has gained by over 1%.
Banking shares are trading mixed as the Reserve Bank of India (RBI) is widely expected to increase in main lending rate viz. the repo rate by 25 basis points to 8% from current 7.75% after a mid-quarter monetary policy review today, to rein in inflation after recent data showed that both consumer prices and wholesale prices accelerated last month. HDFC, SBI and HDFC Bank have gained between 0.2-1%.
Other notable gainers are Bajaj Auto, Hero Moto, Sun Pharma, Tata Power and TCS.
On the losing side, JSPL, ITC, ICICI Bank, Tata Motors and Cipla have declined between 1-2%.
Among other shares, Sun Pharma Advanced Research Company (SPARC) has dipped 5.5% at Rs 155 after the US Food and Drug Administration (USFDA) said it cannot be approved new drug application (NDA) in its present format.
Shares in Multi Commodity Exchange (MCX) has surged 7% to Rs 415 after the company said Forward Markets Commission (FMC) approved Blackstone GPV Capital partners (Mauritius) VI FII proposal to increase its stake in company upto 4.99% through secondary market transaction.
Trent has rallied 14% to Rs 1,210 in early morning deals on the NSE after the Tata-owned company said Tesco Plc, UK's largest retailer, plans to acquire a 50% stake in Trent Hypermarkets for $110 million.
The broader markets are outperforming the benchmark indices- BSE Midcap and Smallcap indices are up by nearly 1% each.
The market breadth in BSE remains firm with 1,063 shares advancing and 529 shares declining.
