Buoyed by renewed hopes of a policy rate cut, the BSE Sensex on Monday made a spirited comeback, gaining over 246 points to close at 25,856.70 -- a two-week high -- on back of a further contraction in WPI numbers for August and better-than-expected IIP for July.
Rate-sensitives realty and banking stocks fuelled the rally as the rupee's slide saw a pause. The rupee was trading 22 paise higher at 66.32 (intra-day) against the dollar.
The broader NSE Nifty too retook the 7,800-level to hit a high of 7,879.95 before settling at 7,872.25, up 82.95 points, or 1.06 per cent. Intra-day, it slipped into the red to hit a low of 7,761.85.
The latest set of macroeconomic data following better-than-estimated IIP numbers for July and a further fall in WPI, which raised hopes of a possible rate reduction from RBI in its policy later this month, influenced trading sentiment, brokers said.
They said, however, investors shrugged off another set of soft Chinese data amid uncertainty surrounding the US Fed action on the rates front. The rate-setters are meeting this week.
Wholesale price index-based inflation plunged to a historic low of (-)4.95 per cent in August, from (-)4.05 per cent in July.
Industrial production expanded at a higher rate of 4.2 per cent in July this year compared with the same month last year as manufacturing activity and offtake of capital goods improved.
Sentiments also got a boost after Finance Minister Arun Jaitley on Monday assured global investors of the "fairest and predictable taxation regime" as he invited them to invest in various sectors, including infrastructure, manufacturing and defence.
The 30-share gauge scaled the day's high of 25,891.73, before ending 246.49 points, or 0.96 per cent higher at 25,856.70, its highest closing since August 31. Intra-day, it slipped into the negative zone to touch a low of 25,531.07.
The gauge had lost 109.37 points in the past two straight sessions.
Both the key indices -- the Sensex and the NSE Nifty -- ended at their two-week highs.
Metal stocks were back in the limelight after the Board of Safeguards upheld the recommendation of the Directorate General of Safeguards (DGS) for imposition of a 20 per cent safeguards duty on certain steel products to protect interests of the domestic industry.
In the metal space, Vedanta, Tata Steel and Hindalco were major gainers, rising up to 4.02 per cent.
Globally, other Asian markets ended mixed on Monday as Shanghai led most regional markets down after another round of disappointing Chinese data at the weekend while European stocks were ruling higher ahead of this week's US Federal Reserve decision on interest rates.
NTPC was one of the top gainers (up 5.06 per cent) while Axis Bank, Wipro, GAIL and SBI, among others, too advanced.
Among the 30 Sensex components, 28 advanced, while Bajaj Auto and Maruti ended in the red.
Sector-wise, the BSE metal index rose the most by surging 2.70 per cent, followed by power, banking, PSU and realty.
Buying activity by retail investors also spread to mid-cap and small-cap stocks, which ended higher with gains up to 1.27 per cent.
Foreign portfolio investors (FPIs) net sold Rs 754.27 crore worth of shares last Friday, provisional exchange data showed.