Markets extended gains for the second consecutive week on hopes of further economic reforms and above-average monsoon coupled with fresh capital inflows from foreign funds into Indian equities.
Shares of FMCG, healthcare and Auto sectors firmed up on good buying enquiries.
Energy stocks, led by heavyweight Reliance Industries, continued their upward march after the Government last week agreed to hike natural gas prices, brokers said.
The S&P BSE Sensex resumed slightly lower at 19,352.48 and dropped further to 19,147.31 on profit booking. But the 30-share index recovered quickly and hit a one-month high of 19,640.27 before end at 19,495.82, showing a gain of 100.01 points, of 0.52%, over the last week.
The key BSE barometer has gained 721.58 points, or 3.84%, in the last two weeks.
The NSE 50-share Nifty index also firmed up by 25.70 points, or 0.44%, to conclude at 5,867.90. The NSE benchmark has hardened by 200.25 points, or 3.53%, in the last two weeks.
The sentiment got a boost after Foreign Institutional Investors (FIIs) turned net buyer and bought shares worth Rs 1,024.70 crore during the week under review, including the provisional figure of July 5.
Banking shares saw selling in the backdrop of 26 private and pubic sector entities applying to RBI for bank licences, heightening chances of competition in the sector.
Sensex tumbled 286 points on Wednesday following all-round selling, triggered by the rupee's slide against the dollar, draft norms on banks' exposure to corporates with unhedged forex and weak global cues.
The Indian currency again breached the 60-mark against the dollar on July 3.
Weak world stock markets, worries over China's growth, growing crisis in Egypt and fears over political instability in Portugal, pushed up crude oil prices to USD 105 a barrel.
Concerns over the rising oil prices that may widen the current account deficit (CAD), impacted negatively as it may prevent RBI from cutting interest rates later this month.
However, monsoon rains were 4% above average in the current week boosted the market sentiment.
Brokers said the market remained firm as heavyweights RIL surged on heavy FII buying and Hindustan Unilever Ltd (HUL) climbed to record high after its Anglo-Dutch parent Unilever Plc increased stake in the Indian firm.
ITC rose after hiking prices for its cigarette brand.
18 scrips out of the Sensex pack ended higher while 12 others finished lower.
Major gainers from Sensex pack were ITC 5.46% followed by Tata Motors 5.24%, HUL 4.12%, Gail India 4.06%, Jindal Steel 3.04%, Sun Pharma 2.60% and BHEL 2.41%, Reliance Ind 2.13% and Cipla 1.95%.
However, ONGC dropped by 4.44%, Tata Steel 3.29%, SBI 3.01%, HDFC 2.64%, Bajaj Auto 2.33%, Coal India 1.93%, Icici Bank 1.74% and Infosys 1.56%.
Among the major indices, S&P BSE-FMCG rose by 6.01% followed by S&P BSE-HC 2.69% and S&P BSE-Auto 0.96%, while S&P BSE-PSU dropped by 2.20%, S&P BSE-Bankex 1.66% and S&P BSE-Metal 1.37%.
The total turnover at BSE and NSE was Rs 8,928.19 crore and Rs 49,278.63 crore, respectively as against the last weekend's level of Rs 8,701.01 crore and Rs 60,801.28 crore.
In one of the weakest weekly string of downslide, the Indian rupee Saturday completed its 9th week of losing string, tumbling by 83 paise to end at 60.22 against the Greenback on sustained dollar demand from importers and some banks amid firm dollar overseas, despite capital inflows and firm local equities.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 59.46 a dollar from last weekend's close of 59.39 but immediately recovered to a high of 58.9650 on initial dollar selling by exporters and also strong rally in local equities.
Later, it reeled under pressure on heavy dollar demand from importers, mainly oil refiners, and some banks on behalf of their clients to a low of 60.59 before settling the week at 60.22, showing a fall of 83 paise, or 1.40%.
In straight nine weeks, it had tanked by 628 paise or 11.64%.
Attributing the rupee fall to dollar demand "by the local industry to repay their debt liabilities", Abhishek Goenka, Founder and CEO, India Forex Advisors said the currency could find support as government plans to unveil reform measures.
In the last two days of the preceding week, rupee had spurted by 133 paise or 2.19% amid signs of capital inflows and moderation in March quarter Current Account Deficit (CAD).
Finance Minister P Chidambaram on Monday in an interview to PTI said, "sentiment will turn in favour" of the rupee as government is "committed to containing the fiscal deficit" within target and is addressing how to finance CAD.
Defence-related dollar demand, losses in domestic stocks before mid-week and dismal service PMI numbers also weighed on the rupee.
Foreign brokerage Credit Suisse said in a report that the recent rupee fall was mostly due to FII debt outflows - their USD holdings are now down to January 2012 levels.
"The concern for us now is on second order effects on EM Equity flows in case the rise in EM (Emerging Markets) bond yields causes further slowdown. Any disruption in EM equity flows can hurt the Indian Rupee," it added.
Slowdown in Chinese growth, political tension in Portugal and the signs of issues in the Eurozone, too, put pressure on the rupee.
However, RBI Governor D Subbarao's comment in Chennai the central bank doesn't have an "an exchange rate target" dented sentiments.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "This week, as expected spot rupee depreciated and traded over 60.00 levels taking cues from dollar demand from importers and strong dollar. The Reserve Bank of India intervened this week and was selling dollars through state banks. Rupee has weakened for the ninth straight week and has depreciated above 11.50% during these nine weeks."
"Looking at the current scenario rupee is expected to go down further as the oil prices are going up which will widen the current account deficit resulting in rupee to trade weak. Spot rupee is expected to trade over 61 levels in coming days, the range for the same is expected to be within 59.80 to 60.80," he added.
The rupee premium for the forward dollar ended mixed on alternate bouts of buying and selling.
The benchmark six-month forward dollar premium payable in December finished lower at 171-172-1/2 paise from last weekend's close of 173-175 paise, while far-forward contracts maturing in June ended higher at 348-350 paise from 339-341 paise.
The RBI fixed the reference rate for the US dollar at 60.3395 and for the euro at 77.8085 from previous weekend's level of 59.6995 and 77.9760, respectively.
The Rupee remained firm against the pound sterling to 90.18 from preceding weekend's close of 90.54 and also improved further against the euro to end at 77.56 from 77.62.
However, it fell back against the Japanese yen to 60.21 per 100 yen from last weekend's close of 59.97.