Indian equities pared early losses on Wednesday and were 0.8% higher in mid-day trade led by gains in banking stocks. Investors, however, exercised caution ahead of US-China trade talks later this week and September quarter corporate results. Most analysts expect a contraction in profits across industries.

At 12.23pm, the Sensex was up 0.84%, or 313.54 points, at 37,845.52, while the Nifty rose 0.81% to 11,216.55 points.

On the Sensex, banking stocks ticked higher, with Indusind Bank up 4%, ICICI Bank rising 2.8%, State Bank of India 2.3%, Kotak Mahindra Bank 2.2%, and HDFC Bank up 2%.

Among laggards, Yes Bank fell 6% followed by HCL Tech and Hero MotoCorp which were down 2.6% and 1.6%, respectively

"The second-quarter earnings-report season will be more of the same - tepid and uneventful. Underlying demand slowdown in the domestic economy and weak global commodities prices are expected to take a toll on earnings with very few bright spots, if any. However, it is important to look at this quarter's numbers from a PBT perspective, as the reduction in the corporate tax rate cuts will result in several adjustments in this quarter's tax numbers (e.g. large corporate banks will make deferred tax adjustments)", said Motilal Oswal Research report in a report to its clients.

"We expect PBT to grow 2% YoY but PAT to decline 6% YoY, dragged by Automobiles and Metals. The difference between PBT and PAT is exaggerated because of the deferred tax adjustments in Financials. Ex-Financials, we expect MOFSL Universe's PBT/PAT to decline 14%/8% YoY. Private Banks, Consumer, Cement and Capital Goods, however, will provide some respite", the report added.

Global equity markets fell after tension between US and China escalated ahead of Chinese Vice Premier Liu He leading a delegation for two days of talks in Washington beginning Thursday. The White House has slapped visa restrictions on Chinese officials, citing mistreatment of Uighur Muslims in China.

"Sentiment continues to be weak after the recent volatility witnessed post the corporate tax cuts announced by the government. For today, expect weak global cues to see a weak opening with second half recovery as markets grossly oversold", according to IIFL Securities.

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