Indian shares clawed back losses to close higher on Wednesday, led by gains in beaten-down healthcare stocks such as Lupin and as a rise in crude oil prices propped up global markets. The benchmark BSE index rose 0.53 percent to end at 24,682.48, while the broader NSE index ended up 0.51 percent at 7,498.75.
The NSE had earlier fallen as much as 0.7 percent, as investors grew apprehensive ahead of the US Federal Reserve's two-day policy meeting starting Wednesday.
Healthcare stocks such as Cipla gained 1.1 percent after falling as much as 2.3 percent on Tuesday, while Lupin shares rose 1.6 percent after shedding nearly 5 percent a day earlier.
The Fed is expected to hold interest rates steady on Wednesday but investors will focus on how comfortable policymakers are in proceeding with the gradual rate hike path they embraced late last year.
Any negative reaction in global markets could impact foreign flows to India. Foreign investors have bought a net $1.67 billion of shares in March, but still remain net sellers of $1.2 billion this year.
"Fed commentary on future rate hikes will be very critical, and that is something which is keeping markets fairly nervous," said Gautam Sinha Roy, a fund manager at Motilal Oswal Asset Management, which has about 97 billion rupees ($1.44 billion) in assets under management.
Both indexes earlier hit their lowest levels since March 2.
Asian Paints fell 2.2 percent after Nomura downgraded the stock to "neutral" from "buy" and reduced its price target citing valuations.
Cairn India dropped 1 percent after HSBC downgraded the stock to "hold" from "buy," saying the current share price does not offer any meaningful upside to its target price.
Lupin dropped 0.3 percent as brokerage Kotak maintained "reduce" rating on the stock with a "cautious" view, saying market expectations for sales of Fortamet ER, a drug that helps lower blood sugar, are too high.
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