The BSE Sensex on Monday rose after stronger-than-expected industrial output data boosted some of the country's major manufacturers, while lenders such as State Bank of India (SBI) rallied after last week's surprise cut in the cash reserve ratio.
Still, earlier stronger gains were pared after the jump in the production data also reduced expectations for a rate cut, which some traders thought could have come as early as this week's Reserve Bank of India (RBI) policy meeting.
Trading is expected to remain volatile in a week filled by key events, including inflation data on Wednesday and the budget on Friday. "IIP numbers are certainly ahead of expectations, but markets will prefer to ignore these numbers as there are bigger events, budget and monetary policy, lined up," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
"RBI would wait for the budget before cutting rates," he added.
The main 30-share BSE index rose 0.5 per cent, or 84 points, to end at 17,587.67 points. Meanwhile, the 50-share Nifty index ended up 0.5 per cent at 5,359.55 points.
Both were among the few gaining indexes in Asia on Monday after data showed industrial output in India grew at its fastest pace in seven months.
Trading is expected to remain volatile in the rest of the week, with some technical traders eyeing resistance levels for shares.
Most prominently, the Nifty index is facing important resistance at 5,420-5,425 points, a range that would provide the equilibrium level at which calls and puts payoffs for the index options would be roughly aligned, according to two dealers.
Among top gainers were engineering and construction company Larsen & Toubro, which ended up 3.6 per cent, and power equipment maker Bharat Heavy Electricals, which rose more than two per cent.
Shares in Reliance Industries, the country's top company by market cap, closed 3.2 per cent higher, on a news report saying the government may reconsider its stance over a dispute regarding the pricing of natural gas in the KG-D6 block in eastern India, dealers said.
Banking shares were also among the top gainers after the RBI delivered a surprise chunky 75 basis points cut in the cash reserve ratio (CRR) late on Friday, raising expectation that net interest margins, and potentially loan growth, would improve in the sector.
Shares in SBI surged 3.8 perc ent, while ICICI Bank gained 1.6 per cent.
Among other movers, Mahindra & Mahindra, the country’s biggest utility vehicle maker, dropped 1.9 percent, marking a second day of losses, after the company said on Friday it will stop production of tractors for two days every week in March.
JSW Steel rose 2.4 per cent after the company said it had entered into manufacturing of electrical steel and is considering production of cold rolled oriented graded steel in the future.
