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Indian equity benchmarks continued their lackluster trade in afternoon session on account of profit booking in front line blue chip counters. The Sensex slipped by over 300 points, while the Nifty fell below 16550 level. Investors were trading cautiously ahead of the US Fed rate decision on Wednesday. Sentiments were fragile as Minister of State for Finance Pankaj Chaudhary said the Central government's total liabilities are seen rising to Rs 155.33 lakh crore in FY23. This would represent an increase of 12 percent over the FY22 figure of Rs 138.88 lakh crore. Traders were also worried with private report that while the monsoon in India is tracking at 11% above normal, the distribution is uneven across the country and could pose a threat to this year’s foodgrain production and may worsen the inflation outlook.

On the global front, Asian markets were trading mostly in green ahead of a forthcoming interest rate hike from the U.S. Federal Reserve. Back home, on the sectoral front, telecom stocks were in lime light as India's biggest-ever auction of spectrum that carries telephone and internet data signals, began on Tuesday with a total of 72 GHz (gigahertz) of 5G airwaves worth Rs 4.3 lakh crore on offer. Reliance Jio, Bharti Airtel, Vodafone Idea and a unit of billionaire Gautam Adani's flagship Adani Enterprises are in the race to bid for 5G spectrum, that offers ultra-high speeds (about 10 times faster than 4G), lag-free connectivity, and can enable billions of connected devices to share data in real-time.

The BSE Sensex is currently trading at 55460.79, down by 305.43 points or 0.55% after trading in a range of 55295.90 and 55834.38. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.92%, while Small cap index was down by 0.71%.

The only gaining sectoral indices on the BSE were Energy was up by 0.03%, while IT down by 2.30%, TECK down by 1.89%, Capital Goods down by 1.27%, Metal down by 1.12% and FMCG was down by 0.97% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finserv up by 4.20%, Ultratech Cement up by 1.03%, Bajaj Finance up by 1.03%, Reliance Industries up by 0.68% and Mahindra & Mahindra was up by 0.51%. On the flip side, Infosys down by 2.92%, Axis Bank down by 2.71%, Dr. Reddy's Lab down by 2.17%, Hindustan Unilever down by 1.95% and Nestle was down by 1.83% were the top losers.

Meanwhile, Crisil Ratings in its latest report has said that India's diamond industry is likely to witness 15-20 per cent decline in revenue in this financial year (FY23) due to falling demand and rising prices of rough gemstone globally. It said revenue of the Indian diamond industry is set to be cut 15-20 per cent to $19-20 billion this fiscal, compared with a decadal high in the last financial year, following a double blow from falling demand and rising prices of roughs across the globe.

The report stated that while volatility in rough diamond prices is typically passed on to the polished diamond prices -- albeit with a lag due to the long operating cycle in the trade -- tepid demand has kept polished prices from fully catching up with rough prices this time around. This could squeeze the operating profitability of Indian diamond polishers by 75-100 basis points to 4-4.25 per cent this fiscal. Accordingly, interest coverage may weaken marginally.

According to the report, a surge in Covid-19 cases has led to lockdowns in several regions in China, which is one of the largest consumers of Indian polished diamonds. Further, it noted that inflation and opening up of other avenues of discretionary spending such as travel and hospitality will dampen demand growth in the US and Europe in the near term. As for prices, the US sanctions on Russian diamond mining company Alrosa following the invasion of Ukraine has cut supplies of rough diamonds by almost 30 per cent.

The report also revealed that pent-up demand and the strong festive season saw Indian diamantaires stocking up on rough diamonds in the second half of last fiscal. While exports of polished diamond grew 48 per cent year-on-year last fiscal, rough diamond imports were up 74 per cent, with almost 40 per cent of the imports being in the closing quarter. The huge inventory build-up was corrected in the first quarter of this fiscal, following the onset of the Russia-Ukraine war at the fag-end of last fiscal and disruptions in the Chinese market because of new variants of Covid-19.

The CNX Nifty is currently trading at 16536.90, down by 94.10 points or 0.57% after trading in a range of 16495.55 and 16636.10. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Bajaj Finserv up by 4.08%, Ultratech Cement up by 0.97%, Bajaj Finance up by 0.95%, JSW Steel up by 0.66% and Reliance Industries was up by 0.61%. On the flip side, Infosys down by 2.94%, Axis Bank down by 2.52%, Dr. Reddy's Lab down by 2.21%, Hindustan Unilever down by 2.04% and Britannia Industries was down by 1.93% were the top losers.

Asian markets were trading mostly in green; Jakarta Composite soared 19.25 points or 0.28% to 6,877.66, Hang Seng increased 343.50 points or 1.67% to 20,906.44, Shanghai Composite gained 20.39 points or 0.63% to 3,270.78, Straits Times advanced 9.92 points or 0.31% to 3,190.39 and KOSPI was up by 6.81 points or 0.28% to 2,410.50.

On the flip side, Taiwan Weighted dropped 129.55 points or 0.87% to 14,806.78 and Nikkei 225 was down by 44.04 points or 0.16% to 27,655.21.