Automakers Mahindra & Mahindra and Tata Motors climbed after both the companies reported strong December sales. Coal India, the world's largest coal miner, firmed after it raised prices.

By 10:25 am (0455 GMT), the main 30-share BSE index was down 0.2 per cent to 15,428.01. It had risen as much as 0.56 per cent in early trade.

The government said on Sunday individual foreign investors would be allowed to direct access to the stock market from Jan. 15. It was the latest step to liberalise Asia's third-largest economy after a year of big losses in the stock market.

“It shouldn't have any impact for the moment because no foreign investor wants to put in money right now”, said Ambareesh Baliga, Chief Operating Officer at Way2Wealth Securities.

“It's a good decision for the longer term”, he said.

The Sensex has been among the worst performing markets in the world in 2011, falling 24.6 per cent, as high interest rates and slowing economic growth dented investor confidence.

Foreign funds were net sellers of more than $450 million last year, compared with inflows of over $29 billion in 2010.

With many world markets closed on Monday, activity was relatively light. In the broader market, there were 688 gainers against 546 losers on total volume of about 86 million shares.

The 50-share NSE index was down 0.4 percent at 4,607.65.

Tata Motors was up 1.2 per cent after the maker of trucks, cars and utility vehicles said December sales rose 22 per cent from the same month a year earlier.

Utility vehicle and tractor maker Mahindra & Mahindra rose 0.5 per cent after its December sales climbed 26 per cent. Top car maker Maruti Suzuki rose 1.1 per cent.

Manufacturing activity surged to a six-month high in December thanks to a spike in factory output and new orders from domestic and international firms, a survey of purchasing managers showed on Monday.

Coal India rose 2.1 per cent to 306.90 rupees after the company said it had changed the benchmark pricing for non-coking coal to gross calorific value.

The state-run company declined to say how much the move would boost revenues, but media reports pegged the increase in prices at more than 30 per cent.

Largest lender State Bank of India and HDFC Bank fell on worries about higher provisioning in the medium term, after the central bank unveiled draft guidelines on Basel III capital regulations late last week.

SBI dropped down 0.3 per cent while HDFC Bank was down 1.3 per cent. However, ICICI Bank was up 0.8 per cent.

STOCKS ON THE MOVE

* Steel Strips Wheels rose 2.8 per cent to 195.60 rupees after the auto parts makers said wheel rim exports rose 18 per cent in December, while truck rim sales jumped 352 percent.

* Two-wheeler maker Bajaj Auto was down 5 per cent at 1,513 rupees. Its December sales rose 10 per cent.

TOP THREE BY VOLUME

* IFCI on 12.7 million shares

* Suzlon Energy on 4.9 million shares

* Jaiprakash Associates on 3.4 million shares

FACTORS TO WATCH

* Euro hits 10-yr low vs yen, more trouble seen in 2012

* Oil ends 2011 up 13 pct, third year of gains

* Treasuries lead gains in 2011, stocks suffer

* Wall St back at Square One, with S&P flat in 2011

On new year high, Sensex gains 69 pts

Stocks open report: Stock markets opened on a promising note on the first trading day of 2012 with the BSE benchmark Sensex gaining over 69 points in early trade.

The 30-share index rose by 69.12 points, or 0.45 per cent to trade higher at 15,524.04 points after the government decided to allow Qualified Foreign Investors to directly invest in the Indian equity market.

The Sensex had lost over 507 points in the previous four sessions.

The broad-based National Stock Exchange index Nifty rose by 11.60 points, or 0.25 per cent to 4,635.90.

Brokers said sentiments turned better after the government decided to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market in order to widen the class of investors, attract more foreign funds and reduce market volatility.

Auto stocks gained on reports of higher sales in December.

Tata Motors rose by 2.07 per cent to Rs 182.10, Maruti Suzuki by 0.54 per cent to Rs 925, while Mahindra & Mahindra by 1.08 per cent to Rs 690.45.

PREOPEN: Sensex seen weak; Tata Motors, M&M may rise

The sensex expected to drop in new year trading on Monday, as continuing concerns about the global economy keep investors wary despite a government decision to allow foreign investors to directly buy stocks.

Automakers Mahindra & Mahindra and Tata Motors could rise after they posted a rise of 26 per cent and 22 per cent respectively in December sales volumes.

“The US was down, and many Asian markets are also closed, so overall for the day, things look negative”, said SP Tulsian, an independent analyst in Mumbai.

By 0245 GMT, the MSCI's broadest index of Asia Pacific shares outside Japan was down 0.3 per cent, while markets in Japan were shut for a public holiday. Indian stock futures traded in Singapore were up 0.2 per cent.

India will allow individual foreign investors direct access to its stock market from Jan. 15, the government said on Sunday, the latest step to liberalise Asia's third-largest economy after a year of big losses in the stock market.

The main 30-share BSE index fell 24.6 per cent in 2011, posting its first annual decline in three years.

STOCKS TO WATCH

* Bank of India, State Bank of India, Union Bank of India and other lenders may be under pressure after the RBI released draft guidelines on Basel III capital regulations.

* Drugmaker Lupin may rise after it said on Friday it had received the U.S. Food and Drug Administration's approval for fenofibrate tablets, used as dietary supplement.

* Fertiliser maker Zuari Industries could rise after its joint venture with Mitsubishi Corp bought a 30 percent stake in Peruvian miner Fosfatos del Pacifico for $46.12 million.

FACTORS TO WATCH

* Euro hits 10-yr low vs yen, more trouble seen in 2012

* Oil ends 2011 up 13 pct, third year of gains

* Treasuries lead gains in 2011, stocks suffer

* Wall St back at Square One, with S&P flat in 2011

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