Indian markets suffered setback on Tuesday, relinquishing all the gains made in previous session and snapping the four days gaining streak. Earlier, the major averages opened with a negative bias tracking muted global cues, as investors nervously waited for the outcomes of the Federal Reserve and Bank of Japan policy meetings that begin later in the day. The key indices oscillated in an extremely tight range through the session as market participants remained on the sidelines lacking any conviction. Global markets have been blowing hot and cold in recent weeks over the Fed's intentions, amid both hawkish and dovish comments from several Fed officials over this period. Further, the BOJ is expected to further ease its ultra-loose policies at this week's meeting, as it struggles to overcome chronic stagnation and quell speculation that it is running out of options. BOJ officials have also suggested that there is room to cut interest rates further, despite criticism that they are hurting financial institutions and even damaging economic sentiment. On the domestic front, sentiments were undermined by the report that India's total external debt rose by 2.2 percent to $485 billion at the end of March 2016, compared to that of $475 billion as of March 31, 2015, largely driven by private commercial borrowings and non-resident Indian (NRI) deposits. Weakness in rupee against the dollar also weighed on the sentiment. Coming with mixed signals, Moody's Investors Service said the reforms undertaken by the government will help boost investor confidence and bolster growth potential, but cautioned muted private investment and banking sector risks will remain a constraint on India's sovereign rating. Investors got some comfort with global rating agency S&P projecting India to clock 8% growth over next few years and stating that India's structural reform agenda has maintained strong momentum and should propel growth higher. Another private report indicated that the investment cycle is likely to see an improvement in India in the medium-term, largely driven by improved rural income due to a normal monsoon and a rise in consumption owing to the Seventh Pay Commission awards. Finally, the BSE Sensex declined by 115.67 points or 0.40% to 28518.83, while the CNX Nifty dropped 32.50 points or 0.37% to 8,775.90.

The US markets closed in green with modest gains on Tuesday, as traders grew cautious on the eve of a pair of major central-bank decisions. The Fed will release its updated policy statement on Wednesday. Investors widely expect the central bank to stand pat on interest rates, so attention is instead being trained on the BOJ where policy surprises are seen as more likely. The Atlanta Federal Reserve's GDP Now forecast model showed that the US economy is on track to grow at a 2.9 percent annualized rate in the third quarter following the latest data on consumer prices and housing starts. On the economy front, home builder construction stumbled in August, another sign of choppy momentum for the housing market. Housing starts ran at a seasonally adjusted annual pace of 1.14 million, 5.8% below July and missing forecasts of a 1.18 million pace. That was 0.9% lower than a year ago. Permits were flat at a 1.14 million pace in August, but were 2.3% lower than a year ago. Single-family starts slid 6% during the month to a 722,000 annual pace, which was 1.2% lower than year-ago levels. The Dow Jones Industrial Average added 9.79 points or 0.05 percent to 18,129.96, Nasdaq gained 6.32 points or 0.12 percent to 5,241.35, while S&P 500 was up 0.64 points or 0.03 percent to 2,139.76. 

Crude oil futures paring their early losses inched higher on Tuesday, despite remarks from a top OPEC official who downplayed the possibility of a deal between major producers to curb output. Traders were eyeing the fed and Bank of Japan's monetary policy announcement. The Federal Reserve is likely to maintain its current ultra-low interest rate Wednesday, while the Bank of Japan may come up with some surprise. Benchmark crude oil futures for October delivery gained $0.14 or 0.3 percent to close at $43.44 a barrel on the New York Mercantile Exchange. In London, Brent oil futures for November delivery declined by $0.07 or 0.01 percent to $45.88 a barrel on the ICE.

Indian rupee ended weaker against US dollar on Tuesday as investors nervously waited for the outcomes of the Federal Reserve and Bank of Japan (BOJ) policy meetings that begin later in the day. Some losses in the domestic equity market and dollar strengthened against other currencies overseas too dampened rupee sentiments. However, the local currency got some support with global rating agency S&P projecting India to clock 8% growth over next few years and stating that India's structural reform agenda has maintained strong momentum and should propel growth higher. On the global front, yen weekend against dollar on the expectation that BOJ will further ease its ultra-loose policies at this week's meeting, as it struggles to overcome chronic stagnation and quell speculation that it is running out of options. BOJ officials have suggested that there is room to cut interest rates further, despite criticism that they are hurting financial institutions and even damaging economic sentiment. Finally the rupee ended at 67.02, weaker by 5 paise from its previous close of 66.97 on Monday.

The FIIs as per Tuesday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4784.32 crore against gross sell of Rs 3819.99 crore, while in the debt segment, the gross purchase was of Rs 1243.40 crore with gross sales of Rs 720.24 crore.

The US markets managed a modestly positive close in last session ahead of the monetary policy decisions by both the Bank of Japan and the US Federal Reserve. Disappointing housing data reinforced some expectations that the Fed will refrain from raising rates. The Asian markets have made mostly a lower start led by the Japanese market which is down by around half a percent as the yen strengthened for a third day amid the countdown to the Bank of Japan's policy statement. The Indian markets turned cautious and lost their four days gaining streak in last session, ahead of much-anticipated central bank decisions in the US and Japan. Today, the start is likely to remain cautious and traders will prefer to remain sideways and will wait for Japanese central bank's announcement to get cues. Traders however will be getting some support with global rating agency Moody's statement that it could upgrade India's rating in 1-2 years if it is convinced that reforms are 'tangible', though it has called the reform process slow and gradual with muted private investment and NPAs posing a challenge. It said that it has a positive outlook on India. On balance, the risk is on the upside. We are continuously monitoring the rating. We see pressure building up in 1-2 years and any tangible change could bring about a change in rating. Meanwhile, the government has reviewed the impact of free trade agreements (FTAs) on the domestic economy and employment generation amid concerns that these pacts may be helping trading partners more than India. There will be some buzz in the infra stocks, as the government has announced the names of 27 more cities that will be developed under the centre's 'Smart City Mission'. The telecom stocks too will keep buzzing, as telecom regulator Trai taking a stern view of the ongoing connectivity dispute between existing operators and Reliance Jio, warned of action in case of service quality violation and has asked all service providers to submit information on congestion levels in their networks.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Dr. Reddy's Laboratories has launched Paricalcitol Injection, USP, in 2 mcg, 5 mcg, 10 mcg, a therapeutic equivalent generic version of Zemplar Injection in the United States market approved by the USFDA.
• L&T Constructions has bagged orders worth Rs 1,726 crore across various business segments.
• Tata Motors has launched a nationwide festive offer, 'Har Week Diwali' for its passenger vehicles customers.
• Tata Steel has decided to pay around Rs 130 crore as annual bonus to its eligible employees for the year 2015-16.
• Yes Bank, the country's fifth largest private sector Bank has partnered with the Fintech startup NiYO to revolutionise the Employee Benefits ecosystem in India.