Markets flitted between gains and losses on Wednesday, as caution prevailed ahead of the US Federal Reserve's policy statement, while a cut to India's economic growth outlook by the International Monetary Fund (IMF) dented sentiment.
Nifty was up 0.05% at around 16,500 in early trade, while Sensex edged up 0.08% to around 55,300. The indices have risen around 4.5% each so far in July as crude prices dropped and eased inflation fears.
Later on Wednesday, the Fed is widely expected to hike rates by 75 basis points, with markets pricing about a 10% risk of a larger increase and watching for any shift in rhetoric.
Meanwhile, the IMF, in an update of its World Economic Outlook on Tuesday, cut India's 2022 growth forecast to 7.4% from 8.2% in April, citing less favourable external conditions and more rapid policy tightening.
"Everyone is waiting with bated breath for the outcome of the Fed's meeting. While markets have discounted a 75-basis point hike, the key will be accompanying commentary and Chair Powell's replies on growth and inflation trajectory," said Ajay Bodke, an independent market analyst.
"As seen in the IMF's latest growth outlook, the prognosis is that the slowdown is here to stay. A section of the market has already started to looking at clues as to when the Fed will start cutting rates in 2023," Bodke said.
In Mumbai, construction major Larsen & Toubro jumped 3.4% to its highest since mid-April after beating estimates for quarterly profit.
Food delivery firm Zomato, which crashed around 22% over the last two sessions, climbed 6.4%.
Department store Shoppers Stop surged 11.7% to its highest in nearly four years after returning to a profit in the June quarter.
Nifty components Bajaj Finance, Maruti Suzuki and Tata Motors are due to report their results later in the day.
