The 30-share index surged 482 points to hit day's high of 25,175.22 boosted by power, PSU, capital goods, auto and realty sector stocks. In previous two sessions, it had rallied 395 points.
However, the index started losing momentum towards the close and briefly slipped into negative territory to touch a low of 24,433.90. It recovered marginally to end 23.53 points, or 0.10 per cent, higher at 24,716.88, surpassing its closing of 24,693.35 on Friday. Intra-day, it swung over 741 points.
BHEL, Tata Power and GAIL led the 18 losers in Sensex while M&M, Sesa Sterlite and Wipro were among the 12 gainers.
The 50-share NSE Nifty after regaining the key 7,500-mark to hit day's high of 7,504.00, succumbed to emergence of profit-booking at prevailing levels. It gave up all gain to close at 7,359.05, a fall of 8.05 points or 0.11 per cent.
Meanwhile the rupee, in the forex market, also turned weak and was trading 29 paise lower at 58.81 after strengthening to a 11-month high of 58.40 against US dollar.
Stock brokers said investors who were sitting gains became cautious and locked in gains in recent outperformers such as power, PSUs, realty, oil and gas and banking sector stocks. Sensex has gained over 2,200 points this month so far.
Modi, who will be sworn is as Prime Minister this evening, is likely to head a 45-member Union Council of Ministers including 24 with Cabinet rank.
Sectorally, the BSE Realty index suffered the most by falling 5.22 per cent, followed by Power index 2.94 per cent.
The Consumer Durables index ended 2 per cent lower and Oil and Gas index fell 1.55 per cent.
However, Auto index continued its upmove and ended 1.47 per cent, Capital Goods index (up 0.56 per cent) and IT index (up 1.46 per cent).
Sanjay Sachdev, Chairman, ZyFin Capital: The current market valuations are at 14x to 15x forward earnings vs. the LTA of 15.8x. Depending on the reform trajectory and macro recovery, we believe markets could sustain the positive momentum in long run. Sectors we believe have a positive outlook are Education, Infrastructure, E&C, Power and Housing Finance. With most expecting India's GDP to grow at 5.5% in FY15e and 6.5% in FY16e, we are of the view that most macro parameters will show improvement over the next 12-24 months, which will eventually lead to policy rate cuts, which again will re-rate equities. The biggest advantage to corporate India will be faster decisions based actions by the new Government, leading to an economic recovery which in turn has already enthused investors. We are in effect moving into a new realm where the long term average of the markets will get redefined. This is because markets are a function not just of earnings but a combination of sustainable earnings along with positive sentiment and confidence. Though earnings may take time to reach the pre-2008 levels, the medium term traction will continue with the strong push by the government to reform and remove some of the impediments the economy has faced recently.
BSE Sensex closes near flat, NSE Nifty falls on Narendra Modi swearing-in day as PM
(Reuters) BSE Sensex ended flat on Monday in a volatile session, giving up earlier gains of nearly 2 percent due to profit-taking in blue-chips such as IDFC while caution ahead of Narendra Modi's ministerial appointments also weighed.
Selling pressure was broad-based as mid-cap shares saw steep falls. The NSE Midcap index ended down 2 percent, after earlier surging as much as 2.1 percent to hit a record high at 10,673.75.
Hopes of an economic revival by the incoming Narendra Modi-led government have helped maintain the BSE Sensex as the best performing equity index in Asia for 2014 with 23.4 percent returns compared to Pakistan's 22.1 percent and Indonesia's 21.7 percent.
Investors are awaiting the composition of Narendra Modi's cabinet, allocation of portfolios to the prime minister's office, and his choice for finance minister, widely expected to be front-runner Arun Jaitley.
"In the short term there would be some consolidation. Expansion of price-to-earnings has happened, now corporate profit growth is on watch," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
"The outlook is improving with Modi being there. I hope all important ministerial positions remain with the Bharatiya Janata Party," Srivastava added.
The benchmark BSE index ended up 0.1 percent, or 23.53 points, at 24,716.88, after earlier rising as much as 1.95 percent.
The broader NSE index lost 0.1 percent, or 8.05 points, to end at 7,359.05, after rising as much as 1.9 percent during the day.
Among blue-chips, IDFC fell 4.7 percent while Tata Power Co ended 4.2 percent lower.
DLF fell 5.9 percent while Bharat Heavy Electricals lost 4.8 percent.
State Bank of India fell 1.9 percent as investors pared positions after Friday's 9.6 percent jump.
Heavy outperformance since mid-March and investors' inclination for reducing perceived volatility in portfolios is leading to paring of positions in mid-cap stocks, dealers said.
Ramco Cements Ltd slumped 6.5 percent, Oriental Bank of Commerce declined 5.8 percent, while Jain Irrigation Systems lost 4.9 percent.
Divi's Laboratories Ltd slumped 4.1 percent, recording its biggest single-day fall since Sept 3, 2013, after the company's Jan-March net profit rose 6 percent to 1.9 billion rupees, lagging some analysts estimates.
However, among stocks that gained, Sun Pharmaceutical Industries Ltd rose 1.2 percent and Ranbaxy Laboratories Ltd ended up 0.4 percent after an Indian court lifted a temporary stay it imposed on the on completion of the companies' $3.2 billion merger.
* BSE index gains 0.1 pct; NSE ends 0.1 pct lower
* Mid-caps slump on profit-taking after heavy outperformance
* Divi's Lab slumps after earnings lag estimates
FACTORS TO WATCH
* Euro roughly flat after Eurosceptic surge
* Brent slips below $110 after Ukraine election
* Bonds, stocks brush off Eurosceptic election gains
* Foreign institutional investor flows