Mumbai: Finance Minister P Chidambaram's promise to shortly reveal a path of fiscal consolidation to regain investor confidence kept the market tempo upbeat for the second week in a row.
Both the key indices, Sensex and Nifty, rose by over 2 percent despite steep fall in heavyweights like SBI and Bharti Airtel amid unexpected decline in industrial output.
Sustained buying by foreign funds also was the major factor for the market to remain firm.
Investors were enthused by Chidambaram's comments that were made before markets closed on Monday to unveiled a broad roadmap to regain investor confidence and the government will work with the RBI to moderate inflation.
Brokers also said trading mood improved on global cues influenced by higher-than-forecast US jobs data at 163,000 for July that came out after Indian markets closed on Aug 3.
The BSE 30-share gauge resumed the week higher and improved further to an intra-trade at four-and-a-half-month high of 17,726.64 on Wednesday, level not seen since March 16, 2012 when it had logged a high of 17,871.00.
However, it could not sustain the gains due to a decline in country's industrial production announced on Thursday and steep fall in telecom giant Bharti Airtel on dismal Q1 performance and also in SBI due to rise in non-performing assets (NPAs) respectively.
The Sensex later ended at 17,557.74, a net rise of 359.81 points, or 2.09 percent. Last week, it had spurted by 358.74 points, or 2.13 percent.
The broad-based NSE 50-issue Nifty also flared up by 104.70 points, or 2.01 percent, to end the week at 5,320.40.
Country's largest state-run bank, SBI, also tumbled on rise in non-performing assets (NPAs), despite more-than double increase in Q1 net profit.
Share values of the Bharti Airtel was the top loser from the Sensex pack with a fall of 13.73 percent after its profit dropped 37 percent in April-June quarter, the tenth decline in quarterly profit.
SBI was the second with a decline of 5.86 percent, which restricted the rise in the sensex, otherwise the gain would have been much more pronounced.
Auto, IT, metal, FMCG and refinery stocks were at the forefront while some of the consumer durable and realty stocks were down on profit-booking.
Buying was seen in some of the key front-line stocks like M&M, Tata Motors, Bajaj Auto, Maruti Suzuki, TCS, Infosys, Sterlite Ind, Hindalco, Jindal Stl, HUL, ITC, RIL, GAIL, L&T, NTPC and Tata Power, while second-line stocks underperformed the sensex, indicating lack of interest from retail investors as the current unstable scenario.
On Monday, heavyweight and petro-chem giant, RIL, notched up its best daily gain in three years -rising by nearly 6 percent ahead of a meeting of an oversight panel to consider clearing annual investment plans for KG-D6.
Auto stocks led the rally on rise in sales in the month of July while IT stocks rose after US-listed Cognizant stood by its full-year revenue forecast.
However, on the last three days of the week, the market saw some selling on reports that foreign brokerages Citigroup and CLSA cut their GDP growth estimates to 5.4 and 5.5 percent, respectively, and also Standard & Poor's on Tuesday downgraded its outlook on Greece to negative from stable.
Index of Industrial production (IIP) declined 1.8 percent in June, considerably weaker than market expectations of a gain of 0.4 percent.
"The negativity and failures on the economic front is reaching the peak with IIP numbers at minus 1.8 percent, whereas stock markets were almost at above 4-1/2 months high. GDP falling and now new estimates of broking houses is below 5 pc, fiscal slippage continues, no signs of inflation cool off rather failed monsoon adding woes to inflation," said Kishor Ostwal, CMD, CNI Research.
According to market analysts, the next week will be dictated by progress of monsoon, inflation data and Q1 results from some key companies.
FIIs continued their buying spree and infused Rs 2,970.96 crore in the week, including provisional data of August 10.
Overall, 23 out of 30 sensex-based scrips closed in the green, while others finished in the red.
Sterlite Ind was the top gainer with a rise of 8.77 percent followed by M&M (7.77 percent), HUL (6.54 percent), RIL (5.27 percent), Hindalco (5.23 percent), Tata Motors (5.02 percent), Infosys (4.70 percent), Bajaj Auto (4.13 percent), Maruti Suzuki (3.86 percent), Jindal Steel (3.49 percent), NTPC (3.34 percent), ITC (3.24 percent), TCS (3.22 percent), GAIL (3.04 percent), L&T (3.01 percent), Tata Power (2.78 percent), Sun Pharma (2.36 percent), HDFC Bank (2.35 percent), BHEL (1.85 percent) and Coal India (1.35 percent).
Among the sectoral indices, the BSe-Auto spurted by 3.86 percent, BSE-IT by 3.56 percent, BSE-Metal by 3.12 percent, BSE-FMCG by 2.85 percent, BSE-Oil&Gas by 2.51 percent and BSE-CG by 1.72 percent, while BSE-CD dropped by 1.80 percent.
Total turnover for the week at the BSE and NSE was higher at Rs 10,603.40 crore and Rs 51,611.93 crore against last weekend's turnover of Rs 9,365.61 crore and Rs 45,317.41 crore.