The Sensex ended flat on Monday, as gains in some interest rate-sensitive stocks such as ICICI Bank and DLF, a day before the Reserve Bank of India (RBI) is widely expected to ease monetary policy, were offset by profit-taking in oil and gas stocks.
Investors are widely anticipating RBI will cut interest rates by 25 basis points tomorrow, easing for the first time since April 2012, after inflation last month eased to a three-year low.
The prospect of rate cuts, along with continued fiscal reforms from the government, have sparked solid gains in shares this month, leaving markets vulnerable to a selloff should RBI surprise by keeping rates on hold.
The Sensex has gained 3.5 per cent so far this month, thanks in a large part to continued strong foreign buying. Foreign institutional investors have bought $3 billion in the first 23 days of the month, marking a record high for that time period, according to a Goldman Sachs report on Monday.
RBI decision comes ahead of what is expected to be a volatile week, with continued earnings results and the expiry of derivatives on Thursday, while the Federal Reserve is set to conclude its two-day meeting on Wednesday.
The benchmark Sensex ended flat at 20,103.35 points, while the broader Nifty ended unchanged at 6,074.80.