The BSE Sensex ended marginally higher in a choppy session on Tuesday, closing at the highest in a month, as gains in Reliance were offset by losses in lenders such as SBI on caution ahead of April derivative contracts expiry and the RBI policy review next week.
The weak inflation print in March and the recent declines in the prices of oil and gold have stoked hopes of at least a 25 basis point cut in benchmark interest rates at the central bank's annual policy review on May 3.
A top economic adviser to the country's prime minister also said on Tuesday India's worst economic slowdown in a decade has bottomed out and growth is expected to pick up to 6.4 per cent in the current fiscal year.
"Fiscal and current account position has definitely improved and therefore 10-12 percent returns in Sensex from here onwards are possible in a year" said Aneesh Srivastava, chief investment officer at IDBI Life Insurance.
The BSE Sensex rose 0.05 percent, or 9.53 points, to end at 19,179.36, after falling as much as 0.66 per cent earlier in the day.
The Nifty rose 0.04 percent, or 2.50 points, to end at 5,836.90, closing above the psychologically important 5,800 level, gaining for a third day.
Goldman Sachs said in a report it now expects the RBI to cut the repo rate by 50 basis points by mid-2013, versus its previous forecast of an equivalent cut only in the March quarter of 2014.
Reliance Industries rose 1.8 per cent on reports that the government is clearing some of its oil blocks.
Technology shares, which slumped after disappointing results and guidance, saw some buying interest. Infosys Ltd rose 0.8 per cent and HCL Technologies gained 1.5 per cent.
Shares in Idea Cellular Ltd rose 2.3 per cent ahead of its January-March earnings results on Thursday.
ICICI Bank Ltd rose 1.1 per cent, while Hero MotoCorp Ltd gained 2.7 per cent ahead of their results on Friday.
However, among stocks that fell, lenders such as State Bank of India was down 1.7 per cent on caution ahead of RBI policy review next week and on profit-booking after rising 12.3 per cent so far in April, as of Monday's close.
Shares in Cairn India Ltd fell 1.5 per cent after its January-march earnings lagged estimates, dealers said.
Cairn India on Monday said its January-March net profit rose 17.1 per cent to 25.64 billion rupees versus 21.86 billion rupees in the same quarter last year.
HDFC Bank Ltd, India's No.3 lender by loan value, fell 1.3 per cent on profit-taking even as it met forecasts with a 30 percent rise in quarterly profit on Tuesday, led by higher loan growth, fee income and stable asset quality.
