India's Nifty traded flat while Sensex gained on Wednesday ahead of the central bank's policy decision, as investors bet on unchanged rates and looked for clues on the inflation and growth outlook.

File photo: A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai (REUTERS)

The benchmarks have shown stark divergence since the launch of a new auction mechanism for stocks with futures and options contracts.

The Nifty fell 0.02% to 24,610.20, while the BSE Sensex added 0.44% to 78,775 by 9:37 a.m. IST.

Ten of the 16 major sectors logged gains. The broader small-caps and mid-caps rose 0.6% and 0.8%, respectively, to all-time high levels.

The Reserve Bank of India is widely expected to hold rates steady, a Reuters poll showed, with Governor Sanjay Malhotra likely to strike a slightly hawkish tone given the inflation risks from volatile crude prices and a monsoon shortfall.

The decision is due at 10:00 a.m. IST in Mumbai.

Since the RBI paused on rates on June 5, the Nifty has gained 5.1%, trimming its year-to-date losses to 5.8%, helped by measures to support the rupee and revive foreign inflows.

"The central bank will opt for a rate pause as it ascertains the impact of crude price volatility and monsoon deficit on inflation and growth, before making any tweaks to its interest rate outlook," said G. Chokkalingam, founder and head of research at Equinomics Research.

"July's stronger monsoon, which narrowed the rainfall deficit to the low teens, progress in Middle East peace talks and an upbeat earnings season have given the RBI room to wait for clearer inflation signals before adjusting policy," Chokkalingam said.

Among stocks, Deepak Nitrite gained 3.5% on posting a three-fold jump in June quarter profit.

Bharti Airtel rose 3.1% to a more-than-five-month high on a profit rise, aided by subscriber additions and users upgrading to costlier plans.

Brent crude fell 1.1% to $78.5 a barrel, on expectations of progress in efforts to end the U.S.-Iran war, aiding global risk sentiment. [O/R]