Raghuram Rajan assuming the office of RBI Governor in September and a strong showing by the BJP in assembly elections also contributed to stock indices breaking their previous all-time highs.
If 2012 was a year that saw Indian bourses scripting a dramatic turnaround after the meltdown, 2013 was marked by consolidation in the first half and a new found optimism by market participants in the second half.
While markets succumbed to decade-low economic growth, inflation, high interest rates, a widening current account deficit and a weak rupee for most of the year, a slew of positive factors led to change in sentiment thereafter.
The Federal Reserve, which had hinted at trimming its monthly USD 85 billion stimulus back in May, finally announced a USD 10 billion cut, helping the markets stabilise as a keenly awaited event was over.
After vacillating in a tight range for a major part of the calendar year, the BSE Sensex recorded a new intra-day high of 21,483.74 on December 9. In 2013 so far, the 30-share index has risen by 1,653.03 points or 8.5 per cent, from the 2012 close of 19,426.71. Last year, it gained 26 per cent.
In 2013, best performing bluechips include TCS (up 68.41 pc), Infosys (53.22 pc), Wipro (39.20 pc), Dr Reddy's (37.21 pc), Maruti Suzuki (21.56 pc) and Tata Motors (19.41 pc).
However, Jindal Steel tumbled by 44.01 per cent, followed by L&T (33.89 pc), BHEL (27.52 pc), SBI (26.51 pc), Sun Pharma (21.31 pc), Coal India (19.94 pc) and Tata Power (17.90 pc).
The 50-issue CNX Nifty of the National Stock Exchange (NSE) also moved similarly to log a new intra-day high of 6,415.25 on December 20. It has gained 369.15 points, or 6.25 per cent, since its last year's close of 5,905.10.
In terms of market capitalisation, investor wealth rose by Rs 20,258 crore to around Rs 69.4 lakh crore across stocks.
However, second-line stocks underperformed the benchmark indices as retail investors preferred to stay away. The BSE-Smallcap and BSE-Midcap indices closed down by 14.92 per cent and 8.58 per cent, respectively.
IT, Pharma, FMCG, Auto and Oil&gas sector registered sharp to moderate gains while Realty, Consumer Durable, Power, Metal, Capital Goods and Banking posted losses.
The key market driver Foreign Institutional Investors (FIIs) bought shares worth over Rs 1.1 lakh crore (nearly USD 20 billion) till December 19. Last year, overseas investors had pumped in Rs 1.28 lakh crore (USD 24.37 billion).
Market experts are of the view that stocks would have surged higher if it was not for recent weak IIP data and price rise, which dashed hopes of rate cuts to accelerate economic growth. Also, the weakness in rupee that slumped from 55 level to 62 versus the US dollar, hit sentiments, they added.
Jignesh Chaudhary, Head of Research, Veracity Broking Services said: "The Indian markets had a pretty exciting year 2013, where they made all-time high and also had seen some deep contraction, volatility and weakness, but luckily survived all the worrying factors that were threatening to pull them down and are poised to create new highs in 2014."
"In 2014, markets will be guided by the outcome of the Lok Sabha election results and positive economic reforms to be introduced by the government to aid growth...expect Sensex to hover in the range of 18,000 to 22,500 levels and Nifty to be between 5,200 and 6,750 levels," he added.
Among BSE sectoral indices, IT shot up by 59.25 per cent, followed by Teck (46.88 pc), Healthcare (21.80 pc), FMCG (9.70 pc), Auto (8.15 pc) and Oil&Gas (3.07 pc).
Laggards include Realty (down 33.38 pc), Consumer Durable (26.33 pc), Power (16.44 pc), Metal (11.66 pc), Banking (10.02 pc) and Capital Goods (7.55 pc).
Auto, IT, Healthcare, Teck and Banking indices logged their all-time highs while Realty registered its historic low.
Capital Goods, Metal and Power recorded their multi-year lows during the year.