Sensex ends at 3.5-month high; Bank Nifty up 3.5%

ALSO READ See Key Market Stats - Top Gainers/ Losers, Most Actives, Highs/Lows See how Global Markets are trading Indian ADRs

It was a bulls' party on the street today. Consistent inflow of foreign money and falling inflation raised hopes for rate cuts which may have contributed to today's rally. This helped the benchmarks stay above psychologically important levels and closed at a three and half months high.

The Sensex rose 353.84 points or 1.98%, to close at 18,202.41 and the Nifty gained 114 points or 2.1%, to end at 5,531.95. In the year 2012, respective benchmarks rallied over 17.5% and 19%.

Foreign money played a key role in the current year. FIIs pumped in more money in the first half of the February itself as compared to January flow. They bought Rs 11,089.30 crore worth of equity shares in January. After looking at today's upmove in largecaps and midcaps, it seemed to be crossing Rs 12,000 crore today.

Hans Goetti of Finaport expects India to outperform other Asian markets for the year. "Markets across Asia are witnessing a liquidity driven rally," he says.

"ECB showed the willingness to expand their balance sheet by almost unlimited amounts. That liquidity finds its way into asset markets and one of the beneficiaries are emerging markets, where returns are potentially the highest," he reasoned.

He believes, India is relatively well positioned within Asia from a valuation and sentiment perspective to benefit from this rally. He expects India to outperform other Asian markets for the year.

All sectoral indices barring oil & gas closed in green. The BSE Realty Index outperformed every sector, rising 5%. Capital Goods, Power, Bank, Auto and Metal indices were up 3.3-4%.

Private power companies' shares rallied quite smartly in last hour of trade. Reliance Power topped the buying list, rising 13% and Tata Power gained 6%. PMO sources said Coal India would sign FSA with private power companies by March 31.

Among banks and financials stocks, ICICI Bank shot up 4% and Axis Bank rose 8%; SBI, HDFC Bank and HDFC were up 2-3%. Shares of DLF surged 6%.

Tata Motors climbed 7% after better than expected numbers in Q3 on consolidated basis. Capital goods majors L&T and BHEL rallied 4.5-5%. Reports that divestment in BHEL may not happen in FY13.

Among other largecaps, Infosys, TCS, Bharti Airtel, Tata Steel, ONGC and Coal India were up 1-2%. However, Reliance Industries underperformed others, losing 1.4% after sources claimed that company's D6 output may fall to 27 mmscmd from April.

Even the market breadth was strong; about 2.5 shares advanced for every share falling on the National Stock Exchange. The BSE Midcap Index was up 2% and Smallcap up 1.3%.

Total traded turnover was more than Rs 2.46 lakh crore, which was quite higher as compared to yesterday's volume of Rs 1.52 lakh crore.

Global markets too gained on hopes that Greek would take the steps needed to secure its second bailout. France's CAC and Germany's DAX were up 1% while Britain's FTSE rose 0.2%. The Dow Jones futures gained 70 points. Asian markets closed 1-2% higher.