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The Sensex and Nifty ended flat due to profit-booking by funds and retail investors in recent outperformers amid firm European cues.
Caution also prevailed ahead of a late spell of quarterly earnings, with Bharti Airtel slated to announce results later in the day.
The broader NSE index ended up 2.8 points or 0.03 per cent at 9,316.85, while the benchmark BSE index closed 7.1 points or 0.02 per cent higher at 29,933.25.
Among BSE sectoral indices, capital goods index gained the most by 1.9 per cent, power 0.99 per cent, metal and oil & gas 0.76 per cent each. On the other hand, consumer durables index was down 0.63 per cent, banking 0.11 per cent, healthcare 0.11 per cent and auto 0.03 per cent.
Top five Sensex gainers were L&T (+2.00%), Adani Ports (+1.56%), Wipro (+1.21%), Axis Bank (+1.21%) and Tata Motors (+0.82%), while the major losers were Hero MotoCorp (-3.07%), Lupin (-2.25%), Bharti Airtel (-1.75%), State Bank of India (-0.89%) and Power Grid (-0.86%).
“The recent rally in banks was a bit overdone as there is still not much clarity with regard to how the government's ordinance for tackling bad debt will pan out,” said Saurabh Jain, assistant vice-president of research at SMC Global Securities.
“Investors will continue to watch the progress of what's left in the earnings season.”
The Nifty PSU bank index fell as much as 1.84 per cent after rising as much as 1.59 per cent in the previous session.
Ambuja Cements and ACC were down 1.2 per cent and 0.6 per cent respectively, while State Bank of India and Bank of Baroda fell about 1 per cent each.
Banks gained on Monday after India tweaked its laws last week to help tackle a record $150 billion in bad loans, a move aimed at pushing reluctant lenders towards writedowns and errant borrowers into insolvency.
European stocks and bond yields rose on Tuesday, boosted by historically low stock market volatility, continuing relief from this weekend's French presidential election and solid corporate earnings.
Europe's index of leading 300 shares was up 0.4 per cent at 1,552 points, Germany's DAX rose 0.3 per cent, France's CAC 40 and Britain's FTSE 100 added 0.4 per cent.
Asian stocks did not perform as well, with China's seventh consecutive loss - the longest losing streak for four years - weighing on the region more broadly.
But overnight, the VIX index of implied volatility on the S&P 500 - the so-called Wall Street “fear gauge” - fell to its lowest intraday level since December 2006. It closed at 9.77, its lowest closing level since December 1993.
US futures pointed to a slightly higher opening on Wall Street, which would see the S&P 500 moving even higher than Monday's record 2,401 points.
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