The benchmark S&P BSE Sensex snapped the two-week losing streak and surged 305 points to end the week above 21,000. Bourses had a subdued beginning of 2014, which will see general election, a development that will be keenly watched by market players.
Fresh foreign fund inflows in equities also boosted the market sentiment. FIIs invested a net of Rs 1,577.97 crore in stocks during the week, as per the SEBI's data, including the provisional figure of January 17.
Weaker-than-estimated US employment data, released last Friday, cheered global financial markets, as investors feel the Federal Reserve may not now accelerate the pace of reduction of its monthly bond purchases.
Inflation, as measured by the Wholesale Price Index (WPI), declined to a five-month low of 6.16 per cent in December.
Shares of capital goods, refinery and banking sectors firmed up on good buying enquiries.
Infosys stock rose 5.05 per cent after the company raised its revenue growth guidance for the current fiscal year.
However, Bharti Airtel fell 5.98 per cent on concerns Reliance Jio's participation in the upcoming spectrum auction may hurt the top telecom firm's marketshare and profitability.
The 30-share S&P BSE Sensex resumed strong and touched a high of 21,379.29, the second-highest intra-day level after touching 21,483.74 on December 9. However, it fell afterwards to end at 21,063.62, still showing a gain of 305.13 points, or 1.47 per cent, from its last weekend's level.
The Sensex had dropped 435.09, or 2.05 per cent, in the previous two weeks.
The NSE 50-share Nifty also rose by 90.20 points, or 1.46 per cent to finish at 6,261.65. It had also dropped by 142.35 points, or 2.25 per cent, in the previous two weeks.
Jignesh Chaudhary, Head of Research, Veracity Broking Services said, "Indian equity markets started with a bang, trading up by more than 350 points, tracking some positive trading by the FII community who have shared their fears as some not so good economic data limited Fed further action on the tapering process. This positive momentum was also buoyed by decline in inflation numbers."
"However markets started losing its winning streak in the middle of the week tracking weak Asian markets and weak Global equities. Positive trading was also hampered due to profit booking seen in few large cap stocks. The markets are keenly awaiting the interest rate decision by RBI schedule to be declared on Monday, 28th of January 2014. We expect Sensex to trade in the range of 20620 to 21700 and Nifty to trade in the range of 6150 to 6350 levels in the coming week," he added.
Twenty-one scrips out the 30-share Sensex pack ended higher while nine finished lower. Other gainers were Bharat Heavy Electricals Ltd (BHEL) 5.22 pct, Cipla 4.80 pct, HDFC 4.75 pct, Larsen 4.72 pct, RIL 3.23 pct, SSLT 2.09 pct, Hero Motocorp 1.97 pct, HUL 1.58 pct, Bajaj Auto 1.52 pct, Gail India 1.45 pct, ONGC 1.30 pct, Dr Reddy's Lab 1.14 pct and Icici bank 1.02 pct while Coal India dropped by 5.52 pct, Tata Consultancy Services (TCS) 2.90 pct, Sun Pharma 2.55 pct, Tata Power 2.49 pct, Tata Steel 1.76 pct and Axis Bank 1.01 pct.
Among the S&P BSE sectoral indices, CG rose by 2.90 pct, Oil&Gas 2.64 pct, Bankex 1.15 pct and IT 0.88 pct while CD 2.28 pct and Realty fell by 1.61 pct.
Second-line stocks underperformed the Sensex on selling by retail investors. As a result, S&P BSE-Midcap and Smallcap indices dropped by 1.42 pct and 1.43 pct respecetively.
The total turnover at BSE and NSE fell to Rs 10,799.08 crore and Rs 54,563.44 crore respectively during the week as from its last weekend's level of Rs 11,663.44 crore and Rs 59,964.52 crore.