Indian equity benchmarks showed a volte-face on Tuesday as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory despite getting off to a gap-up opening. Marketmen were optimistic for most part of the session, as softer-than-expected inflation data fuelled hopes of a rate cut by the central bank at its next policy review in August. Data released late on Monday showed consumer inflation easing to 2.18% in May, helped by a drop in food prices - the lowest since India started publishing an economy-wide consumer price index in 2012. Some support also came with Union Finance Minister Arun Jaitley's statement that the Reserve Bank of India (RBI) was at a fairly advanced stage of preparing a list of borrowers from whom non-performing assets (NPAs) of public sector banks could be recovered under the Insolvency and Bankruptcy Code. The move would help beleaguered public sector banks (PSBs) recover part of their NPAs, estimated at over Rs 6 lakh crore. However, the sanguinity in local markets was under check as profit booking in IT, Metal  and Auto counters exerted downside pressure on the frontline indices and dragged near the psychological 9,600 (Nifty) and 31,100 (Sensex) levels. Investors turned jittery ahead of the US Federal Reserve's two-day policy meeting that kicks off later today where they are widely expected to hike the policy rate this time. Adding the pessimism among investors, Industrial production growth slipped to 3.1% in April compared to the same period last year, when industrial production grew by 6.5%, though it was better than last month. Finally, the BSE Sensex gained 7.79 points or 0.03% to 31103.49, while the CNX Nifty was down by 9.50 points or 0.10% to 9,606.90.

The US markets closed higher on Tuesday, rebounding from a two-day decline but the market's focus was on the Federal Reserve's two-day monetary policy meeting and Attorney General Jeff Sessions' testimony before the Senate Intelligence Committee. The two-day Federal Open Market Committee meeting will wrap up Wednesday with a news conference hosted by Fed Chairwoman Janet Yellen. According to the CME Group, market observers are nearly unanimous in the view that the fed-funds rate will be raised, with a nearly 100% chance of an interest-rate increase. On the economy front, small-business sentiment held steady in May after three straight declines as business owners still expect Washington action on taxes and health care despite partisan tension over numerous probes into the Trump campaign's possible ties with Russia. The National Federation of Independent Business said its small-business optimism index held steady at a seasonally adjusted 104.5 in May from the prior month. This is slightly above the consensus forecast of 104. In May, five of the 10 index components gained, four declined and one remained unchanged. Separately, lower costs of gasoline and other fuels kept wholesale US inflation in check in May. The Dow Jones Industrial Average added 92.80 points or 0.44 percent to 21,328.47, Nasdaq was up 44.90 points or 0.73 percent to 6,220.37, while S&P 500 edged higher by 10.96 points or 0.45 percent to 2,440.35.

Crude oil futures continued moving higher on Tuesday for the second straight session, amid signs that Saudi Arabia will further cut production in order to preserve OPEC's supply quota deal with Russia. Saudi Arabia pledged to reduce exports to customers in July, in an effort to help curb the glut in supply. Though, investors looked ahead to fresh US crude inventory data expected to show draw in crude stockpiles, offsetting concerns about an uptick in output from OPEC members. OPEC's output rose 336,000 barrels a day or 1% to over 32.14 million barrels in May. Benchmark crude oil futures for July delivery ended higher by $0.38 or 0.8 percent to $46.46 on the New York Mercantile Exchange. In London, Brent crude for July delivery ended up by $ 0.81 to $48.67 on the ICE.

Indian rupee ended marginally higher against dollar on Tuesday due to sustained selling of the US currency by exporters and banks. Sentiments remained positive, as retail inflation as well as industrial output data served to bolster expectations of a rate cut by the RBI. Data released late on Monday showed consumer inflation easing to 2.18% in May, helped by a drop in food prices - the lowest since India started publishing an economy-wide consumer price index in 2012. Besides, India's industrial production grew by 3.1 percent in April 2017, as compared to 2.7 percent in the month of March 2017 and against a drop of 1.2 percent in February 2017. The growth was due to good performance of electricity, mining and manufacturing sectors. On the global front, dollar gained against yen ahead of a two-day US Federal Reserve meeting that is likely to provide hints on the central bank's interest rate policy for the remainder of the year.  Finally, the rupee ended at 64.34, 10 paise stronger from its previous close of 64.44 on Monday.

The FIIs as per Tuesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 3517.45 crore against gross selling of Rs 3522.11 crore, while in the debt segment, the gross purchase was of Rs 684.04 crore with gross sales of Rs 567.17 crore.

The US markets bounced back and the Dow and the S&P 500 both climbed to new record closing highs. The gains were partly due to bargain hunting, with traders picking up stocks at relatively reduced levels, though there was some cautiousness too ahead of tomorrow's Federal Reserve announcement on monetary policy. The Asian markets have made a cautious start though many of the indices in the region are in green, tailing the record closing highs overnight on Wall Street. The Indian markets after losing their momentum in the final hours, managed a flat closing in the last session. Today, the start is likely to remain cautious with traders looking ahead to the US Federal Reserve's monetary policy decision due later in the day. There will be some concern with a private report stating that  Indian employers expect steady hiring outlook for next three months, but their confidence have dipped to the least optimistic level since 2005 amid uncertainties in global markets. However, some support can come with reports that the government is working on a new industrial policy with a view to promoting and developing frontier technologies, innovation and enhancing competitiveness of domestic products. Also, the government has put an end to speculation that the rollout of the goods and services tax (GST) will be delayed, with revenue secretary Hasmukh Adhia and the Central Board of Excise and Customs (CBEC) saying the tax reform is on track for July 1 rollout. There will be buzz in the PSU banking space, as the Reserve Bank of India (RBI) has said it had identified 12 of the largest loan defaulters and would order lenders to start bankruptcy proceedings against them to start unclogging the $150 billion in bad debt. Also, the RBI is looking into request for extending the NPA classification period from the current 90-day window to help small and medium enterprises.

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

Nifty Top volumes

• Sun Pharmaceutical Industries' one of the wholly owned subsidiaries has received final approval from USFDA for its Abbreviated New Drug Application for generic version of Zetia, Tablets 10mg.
• Axis Bank is planning to raise Rs 5,000 crore from debentures to fund business growth.
• Maruti Suzuki is acquiring land parcels across the country in a bid to de-risk its future network expansion.
• Kotak Realty Fund, part of Kotak Mahindra Bank's subsidiary Kotak Investment Advisors, is raising total of $100 million.