The benchmark indices recovered over 163 points during the week under review on heavy buying following the two key announcements - moderate decline in India's growth and fall in inflation rate.
After resuming the week on a positive note, the market dropped at the mid-week on global concerns but the fall in inflation rate helped local bourses regain lost ground.
In the week to August 30, the Bombay Stock Exchange bellwether index fluctuated in a range of 14,672.79 and 14,002.43 before ending the week at 14,564.53, a gain of 163.04 points or 1.13 per cent from its previous weekend's close of 14,401.49.
Similarly, the 50-issue Nifty of the National Stock Exchange recovered by 32.55 points or 0.75 per cent to finish at 4,360.00 from last weekend's 4,327.45.
Badly battered interest rate-related counters from banking and auto segments attracted heavy buying on expectations of pause in interest rate hike by the apex bank on the back of a fall in inflation.
Inflation declined marginally to 12.40 per cent for the week ended August 16 following a drop in prices of vegetables, meat and cement, which the Finance Ministry described as "early signs of moderation" in prices.
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India's economy expanded by a slower 7.9 per cent in the first quarter of this fiscal, but it was on expected lines as high interest rates hit key growth engines, especially the manufacturing sector.
Finance Minister P Chidambaram was, however, upbeat about the growth prospects. "I am confident that this year too, we will be more or less correct on our assessment of GDP growth, and the economy will grow close to 8.0 per cent."
The central bank had pegged growth target at eight per cent and PM's Economic Advisory Council (EAC) at 7.7 per cent. The FM's Chief Economic Advisor Arvind Virmani had estimated the growth rate to be between 7.75 per cent and 8.75 per cent.
Low profile kept by the foreign funds, which were net sellers worth Rs 1,212 crore in August so far, was the main cause of concern and the weak American cues this weekend might have a negative impact on the market sentiment in the coming week.
The broader BSE-100 Index rose by 97.09 points or 1.29 per cent to end the week at 7,621.40 from last weekend's close of 7,524.31.
The BSE-200 Index and the Dollex-200 were also quoted higher at 1,782.08 and 676.77 at the weekend compared to their last weekend's close of 1,761.45 and 674.79 respectively.
On the NSE, the S&P CNX Defty, however, settled the week slightly lower by 3.05 points to 3,448.35 while the CNX Nifty Junior concluded at 181.80 points or 2.61 per cent to 7,138.30 from 6,956.50 last weekend.
Among the sectoral indices, the Bankex rose by 353.93 points or 5.32 per cent, the BSE-Auto by 161.71 points or 4.21 per cent, the BSE-IT by 159.56 points or 2.61 per cent.
However, reflecting fall of 4.85 per cent in the top heavyweight and petro-chem giant, Reliance Industries (RIL), the BSE-Oil&Gas index dropped by 282.20 points or 2.84 per cent. The BSE-CG also declined by 58.74 points or 0.49 per cent.