The benchmark S&P BSE Sensex spurted by 364 points this week on almost across-the-board buying triggered by frantic foreign fund inflows amid status quo stance taken by RBI on key interest rates.
On Friday, the 30-share index spurted by 371 points on sharp rise in heavyweight Reliance Industries, whose stock flared up after the government allowed the company, with some riders, to increase price of its natural gas from April.
The market lost 151 points on Thursday in a knee-jerk reaction to US Federal Reserve's decision to taper its monthly bond buying programme starting next month. It bounced back smartly the next day.
According to brokers, the market had already factored in the much-awaited announcement about stimulus roll-back.
The Sensex resumed steady at 20,714.26, but dropped to 20,568.70 on rise in inflation and fears of hike in interest rates before the December 18 RBI policy meeting.
However, the BSE benchmark index later recovered to 21,117.99 before ending at 21,079.72, showing a smart rise of 364.14 points, or 1.76%, over the last week as RBI unexpectedly decided to keep key policy rates unchanged.
The NSE 50-share Nifty also rose by 105.85 points, or 1.72%, to end the week at 6,274.25.
IT stocks rose as Fed's decision to slow the pace of its bond purchases boosted investor confidence about economic recovery in US, the biggest market for Indian infotech firms.
Shares of healthcare, realty, auto, refinery and power also firmed up on good buying support.
Small and mid-cap shares moved up on renewed demand from retail investors and outperformed the Sensex.
Foreign institutional investors bought shares worth a net Rs 6,178.29 crore during the week, as per SEBI's data, including the provisional figure of December 20.
Meanwhile, wholesale price inflation rose to 14-month high of 7.52% in November. According to the government data released last week, retail inflation soared to nine-month high of 11.24% and factory output shrank 1.8%.
Jignesh Chaudhary, Head of Research, Veracity Broking Services, said, "Trading started this week on a flat note, tracking the negative growth figures and high inflationary numbers which were released last week.
"The trend continued for the second day also as market came under more selling pressure anticipating rate hike by RBI and Fed's action on the tapering process."
"But surprisingly, despite high inflation, RBI decided not to raise interest rates, giving much needed cheer to the market," he said.
"The market was also supported by strong buying from the FII community. The Nifty is expected to trade in range of 6,263-6,344 and Sensex between 21,167 and 21,243 according to technical indicators," Chaudhary added.
As many as 26 scrips from the Sensex pack ended higher while the four others finished lower.
Major gainers from the Sensex pack were Maruti Suzuki 6.54% followed by BHEL 6.46%, Cipla 5.93%, TCS 5.50%, Wipro 5.46%, SSLT 5.42%, Infosys 5.02%, Tata Power 4.03%, RIL 3.39%, Hero MotoCorp 2.93%, Bharti Airtel 2.09% and ONGC rose 1.35%.
Among the S&P BSE indices, IT firmed up 5.79%, HC 5.25%, Realty 4.96%, Teck 4.86%, Auto 2.68%, Oil&Gas 2.52%, Power 2.21% and CG shot up 1.98%. Mid and small-cap indices rose 3.17% and 2.62% respectively.
The total turnover at BSE and NSE rose to Rs 11,772.25 crore and Rs 60,818.97 crore respectively as against the last weekend's level of Rs 9,744.50 crore and Rs 53,922.87 crore.
The rupee recovered modestly by eight paise to close the week at 62.04 against the greenback following strong rebound in local equities amid increased capital inflows, despite US Fed's decision to taper its stimulus.
The dollar selling by exporters and some banks exceeds dollar demand from importers, which also supported the rupee rise.
The local currency closed strong on the first day of the week and later showed weak trend for three straight day on hopes of US Federal Reserve will start tapering of its bond buying programme, which was later proved to be right.
US Federal Reserve Wednesday night decided to reduce its monthly stimulus by USD 10 billion from January next year.
However, it outweighed the RBI's surprise status quo decision on all key interest rates as it was already factored in and the rupee rebounded on Friday.
At the Interbank Foreign Exchange (Forex) market the rupee commenced slightly lower at 62.15 a dollar from last weekend's close of 62.12 and immediately touched a high of 61.73, amid indications the RBI had stepped in to support the domestic unit after a spate of weak economic data.
Later, it fell back to a low of 62.48 before recovering smartly to settle at 62.04, showing a rise of eight paise or 0.13%. Last week, it had tumbled by 71 paise or 1.16%.
The Indian benchmark Sensex spurted by 364.14 points or 1.76% during the week while FIIs infused USD 835.21 mln in the first four days of the week, as per Sebi data, which mainly helped the rupee recovery.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd, said, "USD-INR pair traded side-ways last week, but for it appreciated slightly as on Wednesday RBI surprised the investors by living the rates unchanged despite of high retail and wholesale price inflation."