Indian shares recouped early losses and were largely unchanged on Thursday as weakness in financials and materials were offset by gains in IT stocks after the rupee hit a fresh low against the dollar.
The rupee fell to an all-time low of 70.32 against the dollar in opening deals as sentiment weakened after July trade deficit widened and as the U.S. dollar continued to strengthen against Asian peers.
Indian equities gapped lower at open, taking cues from U.S. markets which ended lower on Wednesday on risk-aversion following dismal earnings amid the Turkish lira contagion, but recovered soon as Asian peers tried to regain their footing after Beijing said it will hold trade talks with Washington.
"These are just minor knee-jerk reactions in the absence of major catalysts," said Astha Jain, senior research analyst with Hem Securities in Mumbai.
"Markets are in the bullish territory and we do not expect any major reaction unless there are severe global or domestic triggers," she added.
Jain expects the BSE Sensex to hit 38,200 and the NSE Nifty to touch 11,700 over the next one-month period in the absence of any strong negative factors.
The broader NSE Nifty was down 0.01 percent at 11,433.25 as of 0624 GMT.
The benchmark BSE Sensex was flat at 37,849.06.
Kotak Mahindra Bank, the biggest drag on the NSE index, fell nearly 3 percent to its lowest in 12 weeks after the central bank said on Tuesday that the private lender's preference shares issue to dilute promoter shareholding was not acceptable.
The NSE banking index slipped 0.2 percent with HDFC Bank, HDFC and Indusind Bank adding to the losses.
Reliance Industries dropped nearly one percent after it declared force majeure on gasoline exports from its Jamnagar site.
ONGC Ltd, down 0.7 percent, and Reliance were the top losers in the Nifty energy index, which fell 0.5 percent.
Information technology stocks such as Infosys, Tata Consultancy Services and HCL Technologies were among the top gainers on the indexes, adding between 0.65 percent and 1.3 percent, on a weaker rupee. The Nifty IT index was up 0.5 percent.
Markets were shut on Wednesday on account of Independence day holiday.