Mumbai: The benchmark BSE Sensex, reversing its rally for the past two sessions, Thursday remained mostly undecided which way to move before it closed the day 97 points lower, tracking sluggishness in the global market after gloomy Chinese data added to the level of anxiety.
Though China consumer inflation for August hardened from a year ago, the producer prices cooled for the 42nd straight month, a sign that risks of deflation presisted.
Asian markets ended the day with a negative bias after Standard & Poor's downgraded Brazil's credit rating to junk grade earlier today and slashed growth forecast for Asian economies.
Caution prevailed ahead of key macro data -- index of industrial production (IIP) for July and consumer price inflation (CPI) for August -- which are due on Friday.
Uncertainty over a Fed rate hike next week also kept investors anxious.
There was a late surge at the fag end after the government today spoke of the possibility of advancing the Winter Session immediately after Bihar polls to pass the GST Bill, which it proposes to roll out from April 2016, but that was not just enough to contain the damage.
The BSE Sensex, weighed down by heavy selling in blue-chips, closed at 25,622.17, down 97.41 points, or 0.38 percent.
The 50-share NSE Nifty pared most of its losses to end lower by 30.50 points, or 0.39 percent, at 7,788.10.
"Indian markets opened the day in deep red in line with its global partners which nosedived on the downgrade of Brazil's credit rating by Standard & Poor's. A sharp recovery in the last half hour of trade triggered gains led by short covering," Gaurav Jain, Director, Hem Securities.
"Strengthening rupee also helped the market to recover from day's low."
Hindalco plunged the most, followed by HDFC, ONGC, SBI, and Wipro.
The BSE consumer durables index was the worst hit sector even as technology, metal, PSU and IT burnt their fingers as well.
There were heightened fears of selling as foreign investors net sold shares worth Rs 452.13 crore on Wednesday, provisional data showed.
On the global front, Asian markets ended lower, with Shanghai shares falling by 1.39 percent. European markets were also traded down in early trade amid renewed concerns that the global economy has not got back on track to withstand higher US interest rates.
"Till the Fed decision is finalised, we will be in a volatile phase. This volatility is providing a good opportunity to domestic investors. During the week, we have seen value buying in expectation of stability in FII inflows post the Fed decision," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services.
Veracity Group CEO Pramit Brahmbhatt said, "As the day progressed, the market recovered due to some value buying in the banking sector and closed slightly lower."
While 21 Sensex stocks ended lower, 9 firmed up.
The market breadth turned negative as 1,478 stocks ended in the red, 1,123 stocks closed higher while 113 ruled steady.
The total turnover fell to Rs 2,499.72 crore, from Rs 2,952.52 crore on Wednesday.
