Indian shares ended flat on Tuesday, but the outlook was upbeat on expectations foreign fund investments would gather steam after a recent spate of public issues, traders said.
The 30-issue Mumbai index closed up 0.08 percent at 5,525.09 points, off an intra-day low of 5,434,97, as traders picked bargains in a market that has lost about 12 percent from a record peak struck in January.
"Yesterday's fall created some panic but there is still good foreign demand which has revived confidence," Ketan Jhaveri, a director with D.H. Securities said.
The index fell more than three percent to a three-month closing low last session.
Jhaveri said there was investor focus on stocks which were beaten down recently such as Oil and Natural Gas Corp and Tata Power Company Ltd ONGC jumped 5.8 percent to 834 rupees while Tata Power closed up 0.4 percent at 366.45 rupees.
Foreign funds have pumped in a net $1.5 billion into Indian equities so far this year, after investing $6.7 billion in 2003.
Select auto and cement stocks rose on hopes the booming economy, which is expected to expand at more than eight percent, will bolster demand.
Larsen & Toubro Ltd, the second-biggest cement maker, rose 1.3 percent to 559.70 rupees while Hero Honda Motors Ltd, the biggest bike maker, jumped 6.6 percent to 479.70 rupees.