The Sensex fell 0.05 per cent, while the Nifty ended unchanged from yesterday’s close.
Investors are looking for signs of the government's resolve to continue with reforms after introducing a slew of measures in September, including opening up the multi-brand retail and aviation sectors to foreign investors.
"The market is at a crossroad and waiting for an announcement from the government side," R.K. Gupta, managing director at Taurus Mutual Fund, told Reuters. Markets could take a direction from the developments during the parliament's winter session, Mr Gupta added.
Auto stocks Maruti Suzuki and Mahindra & Mahindra (M&M) stood out in the dull trade, both clocking new 52-week highs. M&M ended over 3 per cent higher.
Infotech stocks saw losses with Infosys ending at Rs. 2,325.40, down 1.46 per cent; BSE IT index ended 0.31 per cent lower. TCS and Wipro bucked the trend nearly gaining 1 per cent each.
HDFC (2.02 per cent), Tata Power (1.81 per cent) were some of the other big gainers on the Sensex.
Shares of United Spirits gained 0.54 per cent to end at Rs. 1,762.20 after British spirits company Diageo commenced an open offer to acquire a 26 per cent stake in its Indian peer for Rs. 1,440 per share.
Shares in Lupin rose 1.11 per cent after the company said its arm, Lupin Pharmaceuticals, has launched a generic version of Abbott Laboratories' cholesterol lowering drug TriCor in the United States.
However, shares in DLF fell 2.4 per cent, extending declines after a private news channel reported the Delhi High Court has dismissed the property company's challenge against a probe by the country's markets regulator.
Gold finance companies Manappuram Finance and Muthoot Finance too fell in trade today after the Reserve Bank of India banned loans for buying gold in a bid to dissuade people from indulging in speculative activity. Manappuram Finance fell over 3 per cent, but recovered to end 1.25 per cent lower at Rs. 31.65. Muthoot Finance closed 0.87 per cent down after shedding nearly 2 per cent in trade.
Hindalco (1.86 per cent), SBI (1.39 per cent), Bajaj Auto (1.39 per cent) and Reliance Industries (1.27 per cent) were some of the other big losers on the Sensex.
Among midcap movers, shares in Eicher Motors gained 1 per cent on hopes of strong demand at its two-wheeler unit Royal Enfield in the festive season. Macquarie initiated its coverage on Eicher Motors on Monday with an "outperform" rating citing capacity expansion in motorcycles, market share gain in heavy trucks and the start of production of Volvo's medium-duty engines.
The markets had a good opening up 0.7 per cent buoyed by the positive sentiment in the Asian and world markets on hopes of a breakthrough in the US tax talks as well as encouraging US housing data. However, they soon pared early gains after the political uncertainty back home took a toll on market sentiment and buying interest tapered off.
G. Chokkalingam, executive director and chief investment officer at Centrum Wealth, told NDTV that the next two weeks may be challenging for the markets although midcaps will continue to do well. A correction in the markets will present an opportunity to buy.
Asian shares rose today on hopes of a compromise in the US fiscal crisis. MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.3 per cent. Australian shares were up 0.2 per cent and South Korean shares opened 1 per cent higher.
European shares too opened lower after Moody's Investors Service scrapped France's top-notch credit rating, reiterating the protracted debt crisis in the 17-nation euro zone.
Overnight, global stocks and commodities surged to recover some of last week's sharp losses on hopes US lawmakers will reach a deal to avert $600 billion in tax increases and spending cuts due to start in January - the ‘fiscal cliff’ that threatens to send the U.S. economy back into recession.
Wall Street climbed almost 2 per cent, extending its Friday rally, with the Standard & Poor's 500 Index closing above its 200-day moving average for the first time in eight sessions.
With inputs from Thomson Reuters