During the day's volatile trade session, the key indices oscillated in a 300-point range. They had receded during the mid-afternoon trade session after touching new intra-day highs.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) touched a new 52-week intra-day high, whereas the BSE Sensex reached its highest intra-day levels in the past 11 months.
However, speculative buying in the final hour of the day's trade aided the equity markets to close on a flat-to-positive note.
The NSE Nifty gained just 25.15 points or 0.29 per cent to 8,615.80 points.
The BSE Sensex, which opened at 27,976.14 points, closed at 28,024.33 points -- up by 47.81 points or 0.17 per cent from the previous close at 27,976.52 points.
The Sensex touched a high of 28,210.88 points and a low of 27,899.93 points during the intra-day trade.
The BSE market breadth was slightly tilted in favour of the bears -- with 1,359 declines and 1,308 advances.
Both indices had ended deep in the red during the previous trade session on Tuesday due to profit booking, along with caution ahead of key global and domestic events.
Initially on Wednesday, the benchmark indices opened on a flat note. However, they soon rose in sync with their Asian peers, especially the Japanese indices.
Besides, increased chances of the GST (Goods and Services Tax) Bill getting passed during parliament's ongoing monsoon session enhanced investors' risk-taking appetite.
Investors were hopeful about the bill's passage after the positive outcome of Finance Minister Arun Jaitley's meeting with his counterparts from the states on the issue on Tuesday.
The pan-India tax reform has been passed by the Lok Sabha but is stuck in the Rajya Sabha, where the government lacks a majority.
Nevertheless, caution ahead of the futures and options (F&O) expiry led to long liquidation which subdued the key indices.
In addition, volatility was flared before the outcome of the US Fed's FOMC (Federal Open Market Committee) meet which is expected to be announced later in the evening.
The meet assumes significance as it will decide whether or not to increase interest rates. A hike in the US interest rates can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
Further, lower global crude oil prices and disappointing quarterly results eroded investors' confidence.
"Caution ahead of the FOMC meet's outcome and the volatility before the upcoming F&O expiry depressed the equity markets," Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.
Dhruv Desai, Director and Chief Operating Officer of Tradebulls, said that CNX Nifty witnessed a highly volatile price movement during the session.
"Bank Nifty traded firm. Downside in USD/INR futures prices also gave support to recovery in CNX Nifty," Desai said.
The Indian rupee strengthened in the day's trade. It appreciated by 14 paise to 67.14 against a US dollar from its previous close of 67.27-28 to a greenback.
"Most aviation stocks traded firm, tracking lower crude oil prices. IT sector stocks recovered well from day's low," Desai added.
According to Nitasha Shankar, Senior Vice President for Research with YES Securities, broader markets outperformed the headline indices.
"FMCG (fast moving consumer goods) and pharma indices were major culprits in the downfall. Bank, media, metal and auto indices pulled markets higher," Shankar noted.
"Elevated levels of volatility is expected to continue tomorrow as well owing to the F&O expiry."
In terms of investments, the provisional data with exchanges showed that the FIIs bought stocks worth Rs 404.69 crore, while the domestic institutional investors (DIIs) divested scrip worth Rs 152.47 crore.
Sector-wise, the S&P BSE healthcare index receded by 121.81 points, followed by FMCG index which declined by 44.02 points and consumer durables index edged lower by 28.32 points.
In contrast, the banking index augmented by 192.37 points, automobile index gained by 146.06 points and the capital goods index edged higher by 77.51 points.
Major Sensex gainers during Wednesday's trade were: ICICI Bank, up 3 per cent at Rs 269.90; Adani Ports, up 1.83 per cent at Rs 228.45; Maruti Suzuki, up 1.64 per cent at Rs 4,558.85; HDFC, up 1.48 per cent at Rs 1,387.80; and Tata Motors, up 1.38 per cent at Rs 510.10.
Major Sensex losers were: Dr. Reddy's Lab, down 10.07 per cent at Rs 2,988.40; ITC, down 1.51 per cent at Rs 247.75; Tata Steel, down 1.29 per cent at Rs 362.90; Reliance Industries, down 1 per cent at Rs 1,013.05; and Axis Bank, down 0.90 per cent at Rs 548.65.
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