The Sensex and Nifty opened marginally lower on December 16, with the focus firmly on the U.S. Federal Reserve's December 17-18 Federal Open Market Committee (FOMC) meeting to decide key interest rates. IT and metal stocks were the major laggards on the Nifty. The Nifty Metal index extended its losses from the previous session, falling 1% due to selling pressure in Vedanta, JSW Steel, and Tata Steel.

At 10 AM, the Sensex was down 169 points or 0.2 percent at 81,963, and the Nifty was down 46 points or 0.2 percent at 24,722. About 2,302 shares advanced, 1,067 shares declined, and 121 shares remained unchanged.

"Currently, the market lacks significant cues and will likely respond to expectations around the Fed's decision," said Aishvarya Dadheech, Founder & CIO of Fident Asset Management. "Even if a rate cut occurs, I don't see a substantial benefit to Indian markets. However, a lack of rate cuts and subsequent profit booking in the US could have some impact here," he added.

According to the CME FedWatch Tool, there is a 97 percent probability of the Fed slashing interest rates by 25 basis points, bringing them down to 4.25-4.50 percent from the current 4.50-4.75 percent. A Fed rate cut generally supports domestic equities by attracting foreign inflows. Indian IT firms, which earn a significant portion of their revenue from the U.S., stand to benefit from such a move.

Dadheech also pointed to quarterly earnings expectations as a critical driver for domestic markets. "If major warnings or downgrades emerge in the next 5-10 days, they could have a larger impact on the market than the Fed's decisions this month," he said.

The Nifty IT index ended its five-day winning streak, dipping 0.3 percent due to losses in TCS, Tech Mahindra, Infosys, and Coforge.

Brokerage firm Citi maintained a 'Sell' rating on TCS, citing tapering BSNL projects, Return on Investment (RoU) scrutiny on smaller deals, and softer UK and Europe demand. The brokerage also had a 'Sell' on Tech Mahindra and LTIMindtree.

Financials rebounded after a weak opening, with Indian Bank, Canara Bank, and SBI leading gains in the Nifty PSU Bank index, which climbed nearly 1 percent.

Among individual stocks, Wockhardt shares jumped 8 percent after the company announced that its antibiotic, Zaynich, enabled a U.S. cancer patient to undergo a successful liver transplant. Afcons Infra rose over 5 percent after the company received a Letter of Award (LoA) from MP Metro Rail Co for a project worth Rs 1,007 crore.

Meanwhile, the broader market outperformed the benchmarks, with the BSE Midcap and Smallcap indices rising over half a percent each.

In the previous session, the Sensex and Nifty broke out of a five-day consolidation phase, closing 1 percent higher. Positive market momentum continues, driven by optimism over economic recovery, government capex in 2HFY25, and a 50-basis point CRR cut by the RBI last week. Additionally, India’s November CPI moderated to 5.48 percent, signalling a potential repo rate cut in 2025.

On the global front, the U.S. CPI reading was in line with street expectations, strengthening the case for a 25-basis-point rate cut at the Fed's December 18 meeting.

"Nifty seems to have got back its bullish momentum," said Deepak Jasani, Head of Retail Research at HDFC Securities. "The short-term support for the Nifty at 24,399, while resistance for the same is seen at 24,992," he added.

For the week ended December 13, the Nifty gained 0.4 percent and the Sensex rose 0.5 percent, marking their fifth straight weekly gain—the longest streak since July. Sectorally, IT was the biggest gainer registering a gain of 2.6% for the week, buoyed by the prospects of a strong US economy and higher realisation on the back of weakness in the rupee. Meanwhile, the FMCG index underperformed owing to the weak guidance given by Godrej Consumer Products.

Globally, all eyes are on three major central banks—the US Fed, Bank of England, and Bank of Japan—for their interest rate decisions this week. Key US data, including Q3 GDP will also be in focus. Domestically, investors are awaiting India's WPI inflation and PMI data, scheduled for release today.

As the second half of December unfolds, analysts anticipate a tapering of FII volumes while stock-specific action continues to dominate the domestic market landscape.

Titan, JSW Steel, Apollo Hospitals, Bharti Airtel, and Hero MotoCorp led the losses on the Nifty 50, dropping 0.7-1.3 percent each. Meanwhile, Shriram Finance, Grasim, RIL, Bajaj Finance, and Bharat Electronics emerged as the top gainers, climbing 0.2-1 percent.