US Fed's decision to continue with the easy-money policy and better-than-expected Q1 results from IT major Infosys kept the market tempo upbeat for the third straight week as both the key indices surged by over 2% to end at nearly 6-week high.
The Bombay Stock Exchange 30-share barometer, Sensex, resumed lower and dipped further to one-week low of 19,185.92 after positive US jobs data triggered concerns that the American central bank will slow the pace of its monetary stimulus later this year.
The market was also impacted after the rupee hit a record low of 61.21 to a dollar on possible winding down of the Fed's $85 billion a month bond-buying programme.
However, a smart recovery in rupee amid steps taken by Sebi and Reserve Bank to curb speculative trade in currency derivatives and US Fed chief's comments about continuing monetary incentive helped the Sensex to bounce back with a vengeance and end higher by 462.65 points, or 2.37%, at 19,958.47, a level not seen since May 30.
In the last three weeks, the Sensex has zoomed by a staggering 1,184.23 points, or 6.31%.
The broad-based 50-issue Nifty of the NSE zoomed by 141.10 points, or 2.40%, to end at 6,009, also a 6-week high.
Trading sentiment was bolstered after Fed chief Ben Bernanke on Wednesday signalled that the monetary stimulus would continue for some time, boosting the prospects of fund flows to the emerging markets, including India, brokers said.
The bond-buying programme, which has flooded global markets with liquidity, has helped support an array of assets, including equities. Infosys, which announced its Q1 numbers on early Friday, fuelled a rally in IT stocks when, contrary to expectations, it kept revenue guidance for FY14 unchanged.
The Bangalore-based software exporter was top gainer from the Sensex pack, rising 14.19% in the week.
The company, whose numbers marked the start of the earnings season, retained its dollar revenue guidance for the fiscal at 6-10%. Infosys revised its rupee revenue guidance upwards to 13-17%, from 6-10% earlier, on account of rupee's depreciation against dollar.
The country's second-largest software exporter posted an almost 4% increase in consolidated net profit to Rs 2,374 crore for the April-June period, which was above market expectations.
"Despite facing an uncertain macro-environment, changing regulatory regime and a volatile currency environment, we have done well in Q1 and are cautiously optimistic about rest of the year," Infosys CEO and managing director SD Shibulal said.
Besides IT counters, shares of capital goods, power, pharma, banking and consumer durable companies were also in the limelight. However, auto, refinery and PSU scrips logged losses on selling.
Auto shares were at the receiving end as car sales fell 9% in June compared to the same month last year as demand continued to suffer due to rising ownership costs and sluggish economic growth, with demand dropping for the eighth straight month.
On the global front, most of the markets closed with gains after US Fed's decision on stimulus and Alcoa Inc's Wall Street beating earnings.
Forex: After long nine-week of sluggish trend, the rupee recovered from its life-time intra-day low of 61.21 logged on Monday and finished the week higher by 66 paise at two-week high of 59.56 against the Greenback after the RBI and Sebi took steps to curb speculative trade in currency derivatives.
Fresh dollar selling by exporters and some banks amid smart rally in domestic equities and weakness in dollar overseas in the mid-week also aided the rupee to rebound.
At the Interbank Foreign Exchange (Forex) market, the local unit commenced sharply lower at 60.95 to a dollar from last weekend's close of 60.22.
It immediately registered an all-time low of 61.21, surpassing its previous low of 60.76 recorded on June 26, after better-than-expected US jobs data raised concerns about the US Fed easing its stimulus programme and initial weakness on local bourses.
However, intervention of the Reserve Bank of India (RBI) through public sector banks helped the recovery from Tuesday. The RBI and Securities Exchange Board of India (Sebi) took steps on Tuesday to curb speculative trade in currency derivatives.
The Sebi, in consultation with the RBI, last night tightened exposure norms for currency derivatives to check large-scale speculation. It cut the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts.
The RBI also imposed curbs on banks with regard to trading in currency futures and options with immediate effect. Under the new norms, banks have been barred from trading in currency futures and exchange-traded currency options market on their own. They will be allowed to trade on behalf of clients.