Indian shares ended flat for a second straight day on Tuesday amid concerns about the outlook for oil prices and domestic inflation.
But bonds gained on news the government will cut customs and excise duties on petroleum products to control inflation.
The 30-share Mumbai index rose just 0.01 percent to 5,102.94 points, near its lowest close for almost three weeks. The marker, which shed 0.01 percent on Monday, has lost more than 12 percent in 2004, and is among Asia's worst performers.
Traders said uncertainty over global crude oil prices and their impact on local inflation has made investors cautious.
"These issues are beyond our control and investors are generally unsure which way oil prices and inflation are headed in the near term," said P.R. Dilip, chief operating officer of investment managers Equity Intelligence Pvt Ltd.
Oil prices eased on Tuesday as fears of supply disruptions in Venezuela and Russia receded. US light crude oil shed 29 cents to $45.76 a barrel after hitting a record-high of $46.91.
Domestic inflation spiralled to a 3-1/2-year high of 7.61 percent in the year to July 31 from 4.32 percent just three months earlier, partly because of costly oil. The commodity is India's largest import.
Cement shares rallied on expectations of strong demand from the Middle East and the local housing and construction sector after the monsoon rains. Market leader Grasim Industries Ltd rose 2.2 percent to 1,049.90 rupees.
Bonds rose a second day on news of proposed excise and customs duty cuts on oil, and later on a government announcement that it will raise 50 billion rupees under the market stabilisation scheme by selling one-year bonds instead of two- to four-year bonds as planned earlier.
The benchmark 10-year bond eased to close at 6.5077 percent against Monday's 6.5693 percent close.
It has pulled back from a 1-1/2-year closing high of 6.6519 percent recorded last Thursday as Finance Minister Palaniappan Chidambaram reassured the market over the weekend there was no need to worry about interest rates despite a spike in inflation.
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