Sensex ends 144 points up; financials zoom ahead of RBI policy

Equity benchmarks showed smart uptrend on Monday, especially led by financials ahead of RBI's quarterly monetary policy meet tomorrow. ONGC, BHEL, Infosys, NTPC, M&M, Maruti, DLF, L&T and Tata Steel also added more strength to the markets today; these gains could be because of short covering.

However, the rally was capped by sell-off in heavyweights Reliance Industries and Wipro. SAIL, Sesa Goa, Hindalco, Cipla and Dr Reddy's Labs along with telecom and Anil Dhirubhai Ambani Group companies' shares added more pressure.

Banks led the major support today, especially ahead of RBI's policy meet on January 25. Experts were expecting 25 bps hike in key rates tomorrow by RBI to control rising inflation. But beyond that would be negative for markets.

Sajiv Dhawan of JV Capital Services said 25 basis points would not be a problem. But if RBI goes for 50 basis points, he said that would obviously be a negative reaction from the markets initially.

Taimur Baig, Chief Economist - India Global Markets Research, Deutsche Bank AG too said that RBI would do 25 basis points. "It would be a positive surprise as far as I am concerned if they do 50 bps because that would mean that they are not that worried about the growth outlook and if anything they are putting inflation as a first priority."

The central bank has raised its key rates six times since March of last year in a bid to tame prices and is expected to tighten further tomorrow at its quarterly monetary review. Petrol prices have also risen sharply in the meantime with state-owned oil companies raising prices by Rs 2.50-2.54 per litre.