The BSE Sensex edged higher on Friday after a negative opening providing hopes that markets will rebound from crucial supports. The Nifty breached the crucial 5,850 level before making a recovery.
Asian shares also edged higher as investors reassessed the Federal Reserve's commitment to its current accommodative policy while weak U.S. and European data clouded growth prospects, limiting gains.
Indian markets witnessed their biggest selloff since July 2012 yesterday. The selloff was triggered by speculation that the U.S. Federal Reserve will withdraw quantitative easing, thus ending the flow of cheap money. But analysts described Thursday's reaction as knee jerk.
"Whether the U.S. applies brakes to QE, whatever happens will not have a substantial effect on markets... what is of more fundamental concern is that corporate profits across the globe are under pressure," TS Harihar, senior vice president of ICICI Securities said.
Mr Harihar said 5,820-5,830 are important supports. There will be major concerns only when markets break these levels with strong volumes, he added.
The Sensex traded 17 points or 0.1 per cent higher at 19,342 while the Nifty advanced 3 points higher to 5,856 as of 09.30 a.m. The rupee also edged up at 54.43 to the dollar.
Most sectoral indices traded in the green, though auto stocks were under selling pressure. On the Nifty, 28 stocks traded higher.
Realty major DLF was back to winning ways, gaining 1.6 per cent. Power Grid, IT major Wipro, Sun Pharma and state-run Gail India were the other stocks that traded with over 1 per cent gains.
Mortgage major HDFC was the top Nifty loser, down 1.6 per cent , after a downgrade by Goldman Sachs. Tata Motors and M&M slipped over 1 per cent.
Kingfisher Airlines shares were up for a fifth day and outperformed other aviation stocks such as Jet Airways and SpiceJet, both of which traded lower.
(With inputs from Reuters)