Sensex rebounds; worries over U.S. election cap gains

Indian shares edged higher on Thursday, as bargain hunting saw indexes recover from over 3-1/2 month lows hit earlier in the session, but sentiment remained subdued due to uncertainty over a tight U.S. presidential election.

U.S. politics overshadowed the Federal Reserve's November policy meeting where it kept rates steady as expected and opened the door a little wider to a rate rise next month.

Asian shares were lower and the S&P 500 suffered its longest losing streak in five years on Wednesday, in a reflection of the worsening risk appetite.

Foreign investors have been net sellers in India for eight consecutive sessions as of Tuesday, including in a special trading session on Sunday to mark the beginning of the Hindu new year, unloading a net total of $703.8 million worth of shares during that period.

"One of the reasons for the volatility is market participants' expectations from the U.S. elections," said Jay Shankar, Chief India Economist & Director, Religare Capital Markets, adding that the Fed's decision and commentary on Wednesday also weighed on the mood.

The broader NSE Nifty was up 0.23 percent at8,533.10 as of 0704 GMT, recovering after two consecutive sessions of falls. The index fell as much as 0.22 percent to its lowest since July 19 earlier in the session.

The benchmark BSE Sensex was 0.19 percent higher at 27,580.22, after hitting over a 3-1/2 month intraday low in early trade.

Financials and consumer stocks led the pullback in both the benchmark indexes.

The NSE Bank index, which fell as much as 1.5 percent on Wednesday, was trading 0.28 percent higher. Canara Bank, which fell 5.6 percent on Wednesday, gained 1 percent.

But IT shares remained subdued on worries that Republican candidate Donald Trump's victory in the U.S. presidential election could hurt the sector.

The Nifty IT index was down 0.17 percent.