Sensex rose 130 points to 25,399.65 on recovery in European stocks from early losses and hopes that Reserve Bank will cut interest rates on Tuesday.
Sentiment also got a lift after a monthly survey showed that India’s manufacturing activity rose to an eight-month high in March driven by strong rise in business orders, leading firms to scale up output.
“In spite of sharp increase in risk-reward ratio, the market continues to trade at the upper-end of the trend-line due to a strong expectation of RBI rate cut,” said Vinod Nair, Head of Research at Geojit BNP Paribas.
With inflation under check and government sticking to its fiscal consolidation path, market expectations are that RBI may cut interest rate by up to 0.50 per cent to propel growth.
Meanwhile, Finance Minister Arun Jaitley also pitched for easier monetary policy, arguing that high interest rates can make the economy sluggish.
For the day, the 30-share Sensex opened up and advanced to a high of 25,424.15, but profit-booking at improved levels dragged it down to a low of 25,223.49.