Infosys started the earnings season on a positive note with an upward revision of its dollar revenue guidance which mainly boosted the market sentiment.
Sustained capital inflows from foreign funds was another factor behind the rise in Sensex. They invested net Rs 3,133.45 crore during the current week including the provisional figure of October 11, as per the data issued by the stock exchanges.
The Sensex resumed lower at 19,880.94 and fell further to 19,647.88 on initial profit-booking from operators.
However, it recovered afterwards to 20,559.69 before ending the week at 20,528.59, showing a smart gain of 612.64 points or 3.08 per cent. It has gained 801.32 points or 4.06 per cent during the two weeks.
The NSE Nifty also rose by 188.90 points or 3.20 per cent to end at 6,096.20. It gained 263 points or 4.51 per cent in last two weeks.
"Sentiment was boosted by positive global markets as investors hoped the US will soon reach some conclusion regarding government shutdown," said Rakesh Goyal, senior vice president at Bonanza Portfolio Ltd.
Surprise reduction of marginal standing facility (MSF) rate by 50 basis points to 9 per cent by RBI ahead of the festive season with the aim of improving liquidity and boosting economic activities also helped the market sentiment.
Meanwhile, the government said the trade deficit in September narrowed to a 30-month low as gold and silver imports plunged. While exports grew 11.15 per cent, imports declined 18.1 per cent last month.
However, the sentiment was also slightly affected after the International Monetary Fund forecast India's economic growth rate would fall to 4.25 per cent in the year ending March 31, 2014.
Out of the 30-share Sensex pack, 24 scrips ended higher while remaining six finished lower.
Major gainers were Tata Motors (10.12 per cent), Infosys (8.57 per cent), Larsen & Toubro (7.54 per cent), Jindal Steel (7.54 per cent), ICICI Bank (6.98 per cent), Tata Steel (6.69 per cent), Tata Consultancy Services (4.48 per cent), Sun Pharmaceuticals Industries (4.17 per cent), Oil & Natural Gas Corpn (4.02 per cent), HDFC Bank (2.75 per cent), Hero MotoCorp (2.22 per cent) and
Bharat Heavy Electricals (2.15 per cent).
Among the major indices, S&P BSE-Realty rose by 8.71 per cent followed by S&P BSE-IT (6.14 per cent), S&P BSE-CG (5.83 per cent), S&P BSE-Teck (5.30 per cent), S&P BSE-Auto (4.30 per cent) and S&P BSE-Bankex (4.10 per cent).
Small-cap and Mid-cap indices also rose by 2.75 per cent and 2.44 per cent on sustained buying from retail investors.
Total turnover at BSE and NSE rose to Rs 9,512.08 crore and Rs 54,168.16 crore, respectively from the last weekend's level of Rs 7,053.40 crore and Rs 41,477.61 crore.