Indian shares ended 0.8 percent higher in choppy trading on Monday as investors remained cautious ahead of the central bank's monetary policy review, but financials led the gains on better-than-expected earnings. The expiry of monthly derivative contracts later this week also added to the volatility in the market.
"It is a wait-and-watch scenario in the market right now as investors wait for the central bank's decision," said R.K. Gupta, managing director of Taurus Mutual Fund.
The Reserve Bank of India is expected to raise key rates by 25 basis points in its policy review on Tuesday. A bigger-than-expected increase to tackle accelerating inflation could crimp economic growth and dampen investor sentiment. The 30-share BSE index ended up 0.8 percent, or 143.8 points at 19,151.28, with 17 of its components advancing and one unchanged. It had briefly turned negative intra-day. The 50-share NSE index or Nifty was up 0.8 percent at 5,743.25 points.
"The market has discounted a 25-basis points rate hike, but is worried it could be a 50-basis point hike," said Ambareesh Baliga, senior vice president at Karvy Stockbroking.
"There is fear; nobody expects the market to move up, so more and more people are getting into cash," he added. But, better-than-expected quarterly profit from India's top lenders saw the sector index add 2.4 percent on Monday.
State Bank of India, which forecast 20-22 percent loan growth in fiscal 2012 due to strong credit demand, gained 3.7 percent to end at 2,693.10 rupees, its highest close in almost three weeks. Rival ICICI Bank gained 1.7 percent to 1,083.90 rupees, after the No. 2 lender beat quarterly profit estimates on growing demand for credit and rising fee income, but climbing interest rates remained a worry for the sector's growth.
Shares in Tata Steel added 3.1 percent after the steelmaker's share sale was covered more than six times. Index heavyweight Reliance Industries Ltd was among the key losers, shedding 1.6 percent. The energy major reported its best quarterly profit late Friday, but outlook was dampened by concerns over the group's gas production.
Third-ranked software services exporter Wipro Ltd continued to fall after the software services firm replaced the chiefs of its key outsourcing business on Friday and reported third-quarter profit growth that lagged its main rivals. Its shares ended 2.6 percent lower.
Larger rivals Tata Consultancy Services was down 0.6 percent while Infosys Technologies gained 0.9 percent. In the broader market, gainers led the number of declines in the ratio of 1.4:1 on volume of about 264 million shares.