The Sensex and Nifty ended lower for a second straight session on Thursday due to derivatives expiry and on lingering concerns over government borrowing exceeding target.

The BSE index dropped 63.78 points or 0.19 per cent to 33,848.03, while the broader NSE index fell 12.85 points or 0.12 per cent to 10,477.90.

The government had said on Wednesday it would borrow a bigger-than-expected Rs 50,000 crore ($7.79 billion) in the remainder of the fiscal year ending March. That sent the yield on the benchmark 10-year bond up as much as 11 basis points to a 17-month high, though the reaction in shares was more muted.

“The F&O expiry is one reason why the markets are range-bound, and also it's year-end, so volumes are generally low. I believe the risk of government breaching its fiscal deficit target is almost counted by the markets,” said Rakesh Tarway, head of research at Reliance Securities.

Among BSE sectoral indices, realty index gained the most by 2.97 per cent, followed by metal 2.04 per cent, IT 0.11 per cent and consumer durables 0.04 per cent. On the other hand, PSU index fell 0.77 per cent, oil & gas 0.46 per cent, auto 0.35 per cent and banking 0.27 per cent.

Top five Sensex gainers were Tata Steel (+1.78%), Dr Reddy's (+1.3%), HDFC Bank (+0.82%), Wipro (+0.72%) and ICICI Bank (+0.51%), while the major losers were State Bank of India (-1.86%), Hero MotoCorp (-1.74%), Sun Pharma (-1.7%), Axis Bank (-1.29%) and Adani Ports (-1.19%).

Metals stocks, however, climbed as copper prices extended gains to hit a near four-year high after a jump in China's imports of the metal boosted expectations of stronger demand from the top consumer.

Vedanta Ltd rose as much as 2.7 per cent, and was on track for a third straight session of gains. Hindalco Industries Ltd , which produces aluminium and copper, surged as much as 4.9 percent to hit a record high.

Pharma stocks were little changed after rising over the last four sessions, with Sun Pharmaceutical Industries Ltd dropping more than 1 per cent

Nifty reclaims 10,500-mark

The 50-share Nifty climbed to 10,515.90, up 25.15 points, or 0.23 per cent in early trade. The 30-share BSE index made a modest gain of 63.24 points or 0.18 per cent to 33,975.05. It had lost 98.80 points in the previous session. All sectoral gauges led by metal and healthcare rose up to 1.07 per cent.

Fresh buying by investors in blue-chip stocks amid foreign capital inflows kept the momentum going. Leads from Wall street were positive, but Asian shares were little changed after an oil rally.

As per provisional data, foreign portfolio investors (FPIs) net bought shares worth Rs 172.32 crore yesterday,while domestic institutional investors (DIIs) sold equities to the tune of Rs 206.68 crore.

The Reserve Bank of India is expected to go in for a policy rate cut of 25 bps in April next year to signal lower lending rates, which are key to the economic recovery, stated a global brokerage report

Asian shares rose to a one-month high on Thursday and were on track for their best annual performance since 2009, while commodity-driven currencies were buoyed by a rally in copper, which hit a four-year peak.

MSCI's broadest index of Asia–Pacific shares outside Japan was up 0.1 per cent at 563.86 points, a level last visited in late November. It has rocketed 32 per cent in the year so far. MSCI world equity index, which tracks shares in 47 countries, also held near record highs. It has surged 21.5 per cent this year. Trade was light across the board with many market participants on holiday.

US stocks had eked out a slight gain on Wednesday, as advances in some major technology stocks offset losses in energy and helped keep major indexes just above the unchanged mark.

The Dow Jones Industrial Average rose 28.09 points or 0.11 per cent to 24,774.3, the S&P 500 gained 2.12 points or 0.08 per cent to 2,682.62 and the Nasdaq Composite added 3.09 points or 0.04 per cent to 6,939.34.

(With inputs from Reuters)

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