Expectations of further economic reforms and healthy macro-data buoyed investors' sentiments and led a barometer index of the Indian equity markets to close 518 points up on Friday.
The barometer sensitive index (Sensex) of the Bombay Stock Exchange (BSE) gained 1.88 percent in the day's trade as interest-rate sensitive stocks like banks, automobile and capital goods zoomed.
The wider 50-scrip Nifty of the National Stock Exchange (NSE) also made healthy gains during the day's trade. It closed 163 points or 1.95 percent up at 8,518.55 points.
The S&P BSE Sensex, which opened at 27,668.06 points, closed at 28,067.31 points-- up 517.78 points or 1.88 percent from the previous day's close at 27,549.53 points.
The Sensex touched a high of 28,100.64 points and a low of 27,643.20 points in the intra-day trade.
Investors were seen hopeful of a rate-cut based on healthy macro-economic data that was released on Friday.
The data pertaining to the wholesale price index (WPI) showed that India's annual wholesale inflation for July fell for the ninth straight month to a historic low of (-)4.05 percent from (-)2.4 percent for the month before.
The WPI coupled with consumer price index (CPI) have pointed at a gradual reining in of prices.
The CPI released on Wednesday showed a fall in India's annual retail inflation rate to 3.78 percent in July.
"The figures from both the CPI and the WPI have come in better-than-expected and the markets and India Inc were waiting for this moment to press their case for a rate cut with the Reserve Bank of India (RBI)," Devendra Nevgi, chief executive of ZyFin Advisors told IANS.
"Though the RBI takes into account the CPI for deciding upon the rate decisions, on a multi-indicator level WPI data will add weight to the case for a rate cut."
According to Nevgi, another major factor supporting the relief rally was the appreciation in the value of yuan after three consecutive days of fall has brought in some relief to the world markets and the Indian rupee.
"The rupee has now stabilised after touching a 24-month low yesterday (Thursday). Yuan appreciation was not expected but it has brought in relief to the Indian markets," Nevgi added.
The yuan had fallen by 4.6 percent since Tuesday. This was the biggest devaluation in the Chinese currency since 1994.
The devaluation of yuan, intended to boost Chinese exports, has made investment in China cheaper.
This led foreign investments away from India and impacted the rupee which on Thursday fell to its lowest level against the US dollar in 24 months at Rs.65.23 to the greenback.
On Friday the rupee stood at Rs.64.99 against a US dollar.
Analysts point-out that another factor which has caught the investors fancy is the possibility that the government might extend the "Monsoon Session" or call for a "Special Session" of parliament to pass the GST (goods and services tax) bill.
"The speculations like an extension of the monsoon session or a proposed special session to get the GST bill passed also boosted sentiments," Anand James, co-head, technical research desk, Geojit BNP Paribas told IANS.
"Markets looks to be clinging on to the hopes given by the Finance Minister that the April, 2016 deadline for the GST roll-out would be met."
Sector-wise, healthy buying was observed in banks, automobile, healthcare, capital goods, metals and realty stocks.
The S&P BSE bank index rocketed by 635.93 points, automobile index zoomed by 455.88 points, followed by healthcare index which jumped by 343.50 points, capital goods index gained by 325.14 points, metals index rose by 105.36 points and realty index edged-higher by 100.99 points.
Major Sensex gainers during Friday's trade were Vedanta, up 3.73 percent at Rs.107.20; ICICI Bank, up 3.58 percent at Rs.302.30; State Bank of India (SBI), up 3.49 percent at Rs.268.45; Reliance Industries, up 3.44 percent at Rs.967.05; and HDFC, up 3.40 percent at Rs.1,299.80.
The major Sensex losers were: DrReddy's Lab, down 0.75 percent at Rs.4,258.05 and Infosys, down 0.68 percent at Rs.1,149.
Among the Asian markets, Japan's Nikkei was down 0.37 percent, Hong Kong's Hang Seng slipped by 0.12 percent, and China's Shanghai Composite Index rose by 0.28 percent.
In Europe, the London FTSE 100 index tripped by 0.11 percent, Germany's DAX Index tumbled by 0.48 percent, and French CAC 40 dropped by 0.58 percent at the closing bell here.
