Sensex trades flat, Nifty below 8,800; banking stocks drag

The benchmark indices pared all its gains to turn flat, dragged down by banks a day after the Reserve Bank of India (RBI) kept its policy rates on hold and said it would shift its stance from "accommodative" to "neutral," signalling an end to any further rate cuts. 

Globally, Asian markets, climbing to their highest in more than 18 months, however, capped the losses.  

At 01:40 pm, the S&P BSE Sensex was trading at 28,286, down 4 points, while the broader Nifty50 was ruling at 8,765, down 3 points. 

Broader markets outperformed the frontline indices. The BSE Smallcap index hit an over nine-year high in intra-day trade, while BSE Midcap was little changed. 

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,354 shares fell and 1,345 shares rose. A total of 143 shares were unchanged.

Banking stocks were the biggest laggards on the Nifty with ICICI Bank Ltd and State Bank of India falling as much as 2.2% and 1.3%, respectively.

Union Bank of India tanked over 8% after the public sector bank's gross non-performing assets rose to 11.70% in the December quarter from 7.05% reported in the same quarter of last financial year.

Among gainers, Indraprastha Gas rose to a record high after posting a 37% increase in its December-quarter net profit.

Manappuram Finance surged nearly 13% to a three-and-a-half-month high after posting a 100% increase in its December-quarter profit.

Overseas, Asian stocks rose as investors grew more confident about the China, world's second-largest economy.