Indian shares pared most of the early gains to trade slightly higher on Wednesday as a slump in oil prices lifted stocks of oil marketers, but a fall in IT counters due to a firmer rupee capped the gains.
The rupee was at 72.12 against the dollar at 0433 GMT, its strongest since Sept. 21 and compared with 72.6750 on Tuesday, supported by a fall in global oil prices and on the central bank's announcement a day earlier that it would buy bonds via open market operations.
"The way crude has broken structurally, it might lie in a low range - the moment it's below $70, its very good for us," said Rusmik Oza, senior vice-president and head of fundamental research at Kotak Securities in Mumbai.
"This should have a soothing effect on the currency going forward."
The broader NSE Nifty was up 0.2 percent at10,603.15 as of 0527 GMT, while the benchmark BSE Sensex was 0.12 percent higher at 35,188.04.
Oil marketing companies (OMCs) surged as crude prices receded, while IT and pharmaceutical stocks weakened due to the stronger rupee.
"The market might be seeing a rotation from IT and pharma stocks to oil marketing companies," Oza said, adding that the fear than NSE might break 10,000 might recede now, given the softening of oil prices.
"We were among the most impacted by higher crude and currency depreciation, along with China, so when these factors reverse, we will be among the biggest beneficiaries."
OMCs such as Hindustan Petroleum Corp Ltd, Bharat Petroleum Corp Ltd and Indian Oil Corp Ltd were the top percentage gainers on the NSE index, with shares rising in a range of 8.7-12.4 percent.
Aviation stocks also climbed, with Interglobe Aviation Ltd rising 6.6 pct to an 11-week high.
Consumer stock Hindustan Unilever Ltd was among the top percentage gainers on both the indexes, rising as much as 3.4 percent to its highest since Sept. 3.
The stronger rupee pushed the Nifty IT index 3.1 percent lower to a two-week low, as shares in software services exporters such as Infosys Ltd and Tata Consultancy Services Ltd declined 3.8 percent and 3.4 percent, respectively.
Pharmaceutical stocks were also under pressure, with the Nifty Pharma index slipping 1.6 percent.
Sun Pharmaceutical Industries Ltd, India's largest drugmaker by market capitalisation, fell as much as 5.1 percent to a near four-month low after reporting a surprise quarterly loss on Tuesday.