Benchmark Sensex scaled the 85,000 level and Nifty breached the 26,000 mark for the first time before paring gains to close flat in a volatile session on Tuesday, dragged by losses in FMCG and select banking shares.

The 30-share BSE benchmark declined by 14.57 points or 0.02 per cent to settle at 84,914.04, snapping its three-day record-breaking run.

In the morning trade, the 30-share BSE Sensex scaled the 85,000 level, jumping 234.62 points or 0.27 per cent to scale a new all-time intra-day peak of 85,163.23. China announcing stimulus measures to bolster its economy fuelled metal shares.

The index, however, hit a low of 84,716.07 in the afternoon session due to profit-taking at record levels.

Selling in Hindustan Unilever, Kotak Mahindra Bank and ICICI Bank dragged the key index from the day's highs.

The Nifty eked out gains of 1.35 points or 0.01 per cent to close at a fresh high of 25,940.40. During the day, it climbed 72.5 points or 0.27 per cent to hit a new record intra-day high of 26,011.55.

Investors are struggling to find clear directions following a record rally, traders said.

Vinod Nair, Head of Research, Geojit Financial Services said, "Domestic benchmarks are attempting to sustain new highs, driven by the US Fed’s aggressive rate cut. Meanwhile, the Chinese central bank’s rate cut, and additional stimulus measures have positively influenced global investor sentiment, resulting in gains for domestic metal stocks." Conversely, FMCG and banking stocks exhibited declines due to profit-booking at higher levels, he said, adding that in the near term, strong inflows from FIIs, driven by the US Fed’s dovish outlook and expectations of a rate cut by the RBI in October, are expected to maintain momentum.

From the 30 Sensex firms, Hindustan Unilever, UltraTech Cement, Kotak Mahindra Bank, IndusInd Bank, Titan, Nestle, Bajaj Finance and Asian Paints were among the biggest laggards.

Tata Steel, Power Grid, Tech Mahindra, HCL Tech, Mahindra & Mahindra and JSW Steel were among the gainers.

The BSE midcap gauge climbed 0.21 per cent while smallcap index dipped 0.04 per cent.

Among the indices, FMCG declined 0.75 per cent, telecommunication (0.57 per cent), services (0.45 per cent), financial services (0.40 per cent), consumer durables (0.31 per cent) and bankex (0.30 per cent).

Metal surged 2.78 per cent, power jumped 1.38 per cent, utilities (1.18 per cent), commodities (0.95 per cent) and industrials (0.47 per cent).

"Although markets ended on a lacklustre note after a volatile session, key benchmark indices hit new milestones signifying that liquidity flows has remained strong as investors are confident of India's long term growth story," said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

"Nifty ended on a flat note in a volatile session on Tuesday after crossing 26,000 for the first time. Asian stocks rose on Tuesday to their highest in more than two and half years, heartened by broad stimulus measures from China while expectations for more US rate cuts kept risk sentiment up," Deepak Jasani, Head of Retail Research, HDFC Securities, said.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong settled in the positive territory. Shanghai and Hong Kong markets ended significantly higher.

European markets were trading in the green. The US markets ended higher on Monday.

Foreign Institutional Investors (FIIs) bought equities worth Rs 404.42 crore on Monday, according to exchange data.

S&P Global Ratings on Tuesday retained India's growth forecast at 6.8 per cent for the current fiscal and said it expects the RBI to start cutting interest rates in its October monetary policy review.

Global oil benchmark Brent crude jumped 2.35 per cent to USD 75.64 a barrel.

Rallying for the third day running on Monday, the BSE benchmark jumped 384.30 points or 0.45 per cent to settle at an all-time high of 84,928.61. The NSE Nifty climbed 148.10 points or 0.57 per cent to close at a record peak of 25,939.05.

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