Benchmark indices were in a volatile mood on Monday as the surprising output cut by oil cartel Opec+ triggered inflation worries among investors while prompting a rethink of their expectations from the outcome of the monetary policy committee (MPC) meeting of the RBI this week.

The 30-share BSE Sensex ended with gains of 114.91 points to close at 59106.44, but it moved in a 412-point range between the highest and lowest points of the day.

The gauge began on a positive note at 59131.16 and came under pressure towards noon falling to a low of 58793.08. It, however, recovered from these lows to hit a high of 59204.82 during the session. While 22 of its constituents ended in the green, the broader 50-share NSE Nifty rose 38.30 points or 0.22 per cent to close at 17398.05.

The last three trading sessions have seen the Sensex climbing 1492 points or 2.51 per cent while Nifty has risen by 446 points or 2.9 per cent.

Market circles said investors took a cautious stance as the MPC started its deliberations even as a rise in crude oil prices soured sentiment.

``The rise in crude oil prices has generated fresh concerns of inflation, leading to fears that India’s central bank will continue to remain hawkish. Investors were of the view that the easing price pressure would provide the central bank with leeway to pause the rate hike. However, the surprise production cut by Opec+ has fuelled concerns about inflationary pressure, which may prompt central banks to remain hawkish," Vinod Nair, head of research at Geojit Financial Services, said.

While the RBI will announce its decision on Thursday, the attention will then shift to corporate results season which will commence next week.Analysts said that while valuations have moderated due to the recent correction, factors such as FPI inflows, the performance of corporate India and RBI’s guidance will determine stock movement in the short term.

Both the bond and stock markets are factoring in a 25-basis point increase in the policy repo rate by the RBI. Yields on the benchmark 10-year security on Monday ended unchanged at 7.31 per cent

According to Madhavi Arora, lead economist, at Emkay Global Financial Services, the policy tone will likely be balanced with the move to a neutral stance.

``The policymakers would still justify the hike stating recent inflation surprises, the stickiness of core and still-elusive 4 per cent medium-term target – in a bid to maintain their inflation-fighting credibility as a central bank, especially as they still view growth impulses stable,’’ she said. The brokerage estimates 2023-24 average headline and core inflation at 5.2 per cent and 5 per cent, respectively.

Oil price surge

Oil prices were up sharply on Monday after Saudi Arabia and other Opec+ producers announced unexpected production cuts and gains in energy shares helped to limit declines in some world stock indexes.

The new cuts could push oil prices towards $100 a barrel, analysts and traders said.

US crude recently rose 6.22 per cent to $80.38 per barrel and Brent was at $84.71, up 6 per cent on the day.

Goldman Sachs lifted its forecast for Brent to $95 a barrel by the end of the year and to $100 for 2024 following the oil output change.

With inputs from Reuters