The Sensex and Nifty ended lower tracking Asian peers ahead of a slew of global events, including the European Central Bank's policy meeting, UK elections and congressional testimony from ex-FBI director James Comey.
But banking shares such as HDFC Bank gained, after the Reserve Bank of India sharply cut its inflation projections and delivered a less hawkish policy statement, which raised the expectations of potential rate cuts.
“Global equity markets are awaiting for the outcome of the three events and their impact on the risks and demand,” said Deepak Jasani, head-retail research, HDFC Securities.
The benchmark BSE index closed down 57.92 points or 0.19 per cent at 31,213.36. The broader NSE index ended 16.65 points or 0.17 per cent lower at 9,647.25.
Among BSE sectoral indices, healthcare index jumped 1.64 per cent, followed by metal 0.72 per cent, power 0.25 per cent and auto 0.00 per cent. On the other hand, oil & gas index fell the most by 1.38 per cent, IT 1.33 per cent, TECk 1.19 per cent and PSU 0.6 per cent.
Top five Sensex gainers were Dr Reddy's (+3.79%), Sun Pharma (+3.38%), HDFC (+2.28%), Cipla (+1.77%) and Tata Steel (+1.61%), while the major losers were TCS (-3.59%), GAIL (-3.44%), Asian Paints (-1.61%), Hero MotoCorp (-1.55%) and ICICI Bank (-1.42%).
Financial stocks pushed the indexes higher, with Kotak Mahindra Bank and HDFC Bank driving the gains after the Reserve Bank of India made it easier for India's stressed banks to lend, cutting their statutory liquidity ratio by 50 basis points to 20 percent of total deposits from June 24.
IT stocks fell and the Nifty IT index was down 1.2 per cent. The index has risen nearly 3 per cent this year, as of Wednesday's close.
Shares of Reliance Communications continued their slide, after the embattled mobile carrier pushed back against Moody's and Fitch, disagreeing with their rating downgrades earlier on Wednesday. Shares fell as much as 2.8 per cent to their lowest in over a week.
Petronet LNG shares fell as much as 3.4 per cent to their lowest in over two weeks after GDF International sold its entire 10 per cent stake of 75 million shares, raising Rs 3,150 crore ($489.23 million), according to IFR.
European stocks inched higher and the euro and the pound barely budged, as markets readied for a triple-dose of excitement - an ECB meeting, a British election and testimony by the ex-FBI chief fired by Donald Trump last month.
Much has been made of the Triple Threat Thursday but beyond the commentary on the outside risks from those events it was hard to see any real trepidation in prices.