The benchmark index wobbled after an early rise, weighed down by IT stocks that were under pressure on the back of a strengthening rupee. The metal and oil & gas stocks were trading higher as commodity prices gained on a weakening dollar.
Asian stocks extended their advance on Thursday after better-than-expected earnings reports from US companies helped push the Dow Jones industrial average pass the 10,000 mark for the first time in a year.
The Sensex was down 32 points at 17,198, after hitting day’s high of 17,350 in early trade. The Nifty was down 10 points to trade at 5,152.
Fundamentally, the Indian markets are looking stretched but rally in overseas markets is getting carried over to India, said Anand Tandon, director of equities, Brics Securities.
In economic data, the inflation for the week ended October 3 rose 0.92 per cent from a year earlier, as compared to 0.7 per cent in the previous week. The inflation has remained in the positive territory for the fifth straight week.
The dollar, meanwhile, showed few signs of rebounding from its recent descent, falling to another low against the euro. Commodities prices gained as a result, with oil trading at its highest point this year near $76 a barrel.
The Indian rupee strengthened further against the dollar to breach the 46-level after nearly 13 months on steady inflow of foreign funds.
Among the Sensex stocks, NTPC was up over 2 per cent while Tata Power added 1.9 per cent. Metal stocks Tata Steel and Sterlite were up 1.4 per cent and 0.8 per cent respectively. The heavyweight RIL was up nearly 0.85 per cent. IT stocks TCS, Wipro and Infosys were down close to 2 per cent each.
Markets across the Asian region traded higher for a third straight day after the Dow broke through the pyschological five-digit barrier for the first time since October 2008, a milestone that added to investor belief in the market's turnaround.
Wall Street's move higher was driven partly by third-quarter earnings reports from chip maker Intel Corp and banker JPMorgan Chase & Co. that strengthened confidence in the economy.
In Japan, the Nikkei 225 stock average gained 157.40 points, or 1.6 per cent, to 10,217.61, and Hong Kong's benchmark added 195.02, or 0.9 percent, to 22,081.50.
South Korea's Kospi edged up 7.83 points, or 0.5 per cent, to 1,656.92. Markets in mainland China, Australia and Taiwan also were modestly higher.
Oil prices rose in Asia on growing investor optimism about an economic recovery and as the US dollar sank further. Benchmark crude for November delivery was up 72 cents to $75.90, the highest since October 2008. The contract added $1.03 overnight.
The dollar was little changed at 89.38 yen, but lost more ground against the euro. The euro climbed to $1.4950 from $1.4933.