Equity benchmarks on Wednesday underwent a smart recovery from intra-day lows to close flat for the second session straight as a hike in market heavyweight RIL offset profit-booking in FMCG, finance and IT counters.

A steadily decreasing rupee also curbed investor sentiment, traders said.

After dropping to a low of 51,450.58 in late afternoon trade, the BSE Sensex regained lost ground to finish 85.40 points or 0.16 per cent down at 51,849.48.

The broader NSE Nifty inched up 1.35 points or 0.01 per cent to close at 15,576.20.

The biggest laggard among the Sensex constituents was ITC, dropping 2.88 per cent, a day after the company reported a net profit of Rs 13,389.80 crore for FY21, as against Rs 15,584.56 crore in the previous fiscal.

Tech Mahindra, Axis Bank, Asian Paints, Kotak Bank, TCS, HCL Tech, HDFC and Bharti Airtel were among the other laggards, shedding up to 1.20 per cent.

On the other hand, IndusInd Bank, PowerGrid, Reliance Industries, Bajaj Auto and Maruti ended in the green, climbing as much as 1.81 per cent.

"Ahead of the MPC policy, domestic market continued its volatility with a mixed bias. Selling was witnessed in financials, IT and FMCG stocks but it reduced towards the close of trading," said Vinod Nair, Head of Research at Geojit Financial Services.

Weakness across US and Asian markets also added to the negative trend, he noted.

"PSU banks attracted buyers in hopes that the government will soon finalise the list for privatisation. In the policy, RBI is expected to focus on economic growth by maintaining the status quo on policy rates and ensuring liquidity while keeping an eye on the inflationary pressure due to rising commodity prices," Nair said.

The Reserve Bank's rate-setting panel, Monetary Policy Committee (MPC), began its three-day deliberations on Wednesday amid expectations of a status quo on benchmark rate mainly on account of uncertainty over the impact of the second wave of the Covid-19 pandemic.

Sector-wise, BSE teck, IT, FMCG, bankex and telecom indices fell up to 0.56 per cent, while power, energy, auto and realty closed higher.

Broader BSE midcap and small-cap indices rallied up to 1.75 per cent.

India reported 1,32,788 new coronavirus infections, taking the country's tally of Covid-19 cases to 2,83,07,832, while the daily positivity rate has further dropped to 6.57 per cent, according to the Union Health Ministry data updated on Wednesday.

Meanwhile, extending losses for the third straight session, the rupee fell by another 19 paise to end at 73.09 against the US dollar. The domestic currency has lost 64 paise in three days.

"The Indian Rupee depreciated amid strong dollar and muted domestic markets. The US Dollar gained strength amid rise in US treasury yields and improved economic data from the US. Further, surge in crude oil prices added downside pressure," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.

Global markets perched near record highs following encouraging macroeconomic data as countries re-emerge from the coronavirus lockdowns.

Elsewhere in Asia, bourses in Shanghai and Hong Kong ended in the negative territory, while Tokyo and Seoul rose.

Equities in Europe were trading with gains in mid-session deals.