The frontline Indian equity benchmarks are trading modestly lower in early afternoon  trade, tracking weakness in other Asian markets and a flat finish on Wall Street. The main Indian stock indices are struggling for direction in what is  a lackluster session due to a public holiday on account of Janmashtami and indecisive global cues.

Dismal IIP data for June has increased pressure on the policymakers to take decisive action to revive economic growth. But, the RBI is unlikely to budge on policy rates unless the Government shows some gumption and takes concrete measures to rein in swelling fiscal deficit.

At 12:29pm (IST), the BSE Sensex was trading at 17,520, down 40 points  over the previous close. It had earlier touched a day's high of 17,563 and a day's low of 17,501. It opened at 17,515.

The NSE Nifty was quoting at 5,309, down 13 points over the previous close. It earlier touched a day’s high of 5,323 and a day’s low of 5,303. It opened at 5,308.

Infosys, TCS, ONGC, ICICI Bank, Bharti Airtel, Sun Pharma, SBI are among the notable leaders in the Sensex and the Nifty.

RIL, Wipro, Tata Power, HDFC, Tata Motors, M&M, Bajaj Auto, BHEL, HUL  are the top laggards in the Sensex and the Nifty.

The BSE Small-Cap index and BSE Mid-Cap index are trading flat.

 FMCG, IT, Teck, and HC indices are the gainers.

Oil and Gas, Metal, Realty and Capital Goods,  Power, Auto, PSU,  Consumer Durables , Bankex  indices are the losers.

Shares of SBI are in the spotlight as investors await the banking titan's latest quarterly results. The stock is also in focus after UBS downgraded it to "sell" from "buy", saying that a weak monsoon would add to its already high non-performing loans.

UBS expects SBI's margins to decline due to rising cost of funds and potential cuts in the lending rate.

UBS lowered its FY13 and FY14 earnings forecasts by 13%, while reducing its 12-month price target by 30% to Rs 1,800, in a note released late on Thursday.

SBI stock slumped 4.5% to Rs 1,968.75 on Thursday, its biggest daily percentage fall since February 22, on speculation that the bank could report disappointing earnings for the April to June quarter.

 Consumer Durables and Auto sector indexes are the top losers on BSE followed by Power, Realty, Banking and Capital Goods indices. Metals, PSU and Pharma indices too are trading in the red. Oil & Gas, Teck, FMCG and IT indices are trading in the positive territory. The market breadth is mildly negative, thanks to a subdued trend in the broader indices. The INDIA VIX is marginally higher.

Investors seem to be taking a breather after the recent spike that was predicated on rising speculation over policy intervention from central banks around the globe to shore up growth.

Even back home, markets have advanced on expectations of some progress on pending economic reforms. So, any material gains from here on will hinge on Government measures and possible easing by leading central banks.

Asian stock indices were trading mostly lower, as investors stepped back after a five-day rally, as worse-than-expected Chinese trade data stoked worries about decelerating growth across the world. Corn and wheat futures rose for a third day on US drought.

The euro was headed for a weekly drop before eurozone data next week that is forecast to show the region’s economy shrank in the second quarter. A widely tracked Asian benchmark pared the biggest weekly gain since January.

The MSCI Asia Pacific Index gained 0.7% to 120.94 as of 12:31 p.m. in Tokyo, with about three stocks rising for each that slid on the index.

The index rose to a three-month high on Thursday, but was set for its largest weekly gain since late January. The index is up 2.9% this week.

China's trade surplus unexpected narrowed in July, as exports barely grew from the year-ago period and imports increased at a slower pace, according to data released today.

The trade surplus for the month dropped to US$25.10bn from US$31.70bn in June, falling way short of estimates for a surplus of US$35.20bn.

China's exports rose just 1% from the year-ago period, while imports expanded 4.7%, compared to expectations for an 8% rise in exports and a 7% rise in imports.

In June, China's exports rose 11.3%, while imports increased 6.3%.

Separately, the Reserve Bank of Australia (RBA) raised its 2012 growth forecast on stronger-than-expected consumer demand, while saying the sustained currency strength could prove more of a drag on the economy than in the past.

There is more action on the streets as the playful side of Lord Krishna is celebrated on Janmashtami. Youngsters will form human pyramids to reach a high-hanging pot of butter and break it. For the government and policymakers they have many high-hanging pots to reach.

IIP contracted by ~2% in June – increasing the headache for policymakers, who have been grappling with a slowing economy, sticky inflation, high borrowing costs, widening twin deficits and a global mess. But, the people in charge of monetary and fiscal policies are at loggerheads when it comes to taking action to revive growth. While the RBI blames loose fiscal policy for its reluctance to cut rates, the Government is banking on the central bank to blink first. The tug-of-war is not over yet and one doesn’t really know as to how it will end.

Meanwhile, the accuracy and credibility of the IIP has been in doubt for quite a while now. So, one need not make too much of hue and cry about dismal IIP numbers. All eyes will be on Q1 GDP data due out on Aug. 31. A number of independent research firms have slashed their FY13 GDP forecasts. There is a fear that rating agency S&P could downgrade India's credit ratings given the lack of progress on pending reforms, poor monsoon and decelerating growth momentum.

The start today was a muted one. We may have entered a consolidation phase for the time being after the recent spike. Key Indian stock indices could remain rangebound as investors await decisive remedial measures from the Centre.

Globally too, things have turned quiet in the last couple of sessions, as investors take a breather following a world-wide rally in risky assets. Trading volumes have ebbed, both, in the US and European markets of late. Indices in the US are trading near three-month highs while their European counterparts are hovering around four-month peaks. Asian markets are mostly lower this morning as the mix of economic data and potential policy intervention remains inconclusive for now.

The euro was set for the first weekly drop in three weeks before the release of eurozone GDP data next week. GDP in the euro area is likely to have contracted 0.2% in the three months through June after being unchanged in the first quarter, according to consensus estimate.

Investors should be wary of a steepening yield curve in the US Treasury market, according to Pacific Investment Management Co.’s (PIMCO) Mohamed El-Erian.

While yields on government securities due in eight years and less are anchored by Federal Reserve monetary policy, bond buyers should be wary of longer-maturity debt, El-Erian, the CEO of the world’s largest bond fund manager, was quoted as saying.

Key Results Today: Apollo Hospitals Enterprise, Bharat Forge, BPCL, Gammon Infra, Hathway Cable Datacom, India Infoline, Pentamedia Graphics, PVP Ventures, SBI, Shipping Corporation of India, Siemens, SREI Infrastructure Finance, Sun Pharma, Sundram Fasteners, Trigyn Technologies, UCAL Fuel Systems.

Trend in FII flows: The FIIs were net buyers of Rs.3.37bn in the cash segment on Thursday while the domestic institutional investors (DIIs) were net sellers of Rs.7.54bn, as per the provisional figures released by the NSE.

The FIIs were net sellers of Rs 2.4bn in the F&O segment on Thursday, according to the provisional NSE data.

The foreign funds were net buyers of Rs 11.38bn in the cash segment on Wednesday, according to the SEBI figures.

Global Data Watch today: China Trade Balance (Jul), China Imports and Exports (Jun), Australia RBA Monetary Policy Statement, Japan Industrial Production (Jun), Japan Capacity Utilization (Jun), Germany Consumer Price Index (Jul), France Budget (Jun), France Industrial Output (Jun), Italy Consumer Price Index (Jul), UK Producer Price Index (Jul), Portugal CPI, US Import Price Index (Jul) and US Monthly Budget Statement (Jul).