The Sensex and Nifty marched higher for the third session on the trot on Friday as investors continued to accumulate banking, infrastructure and FMCG stocks despite unabated selling by foreign funds.
The 30-share BSE benchmark Sensex advanced 303.38 points or 0.56 per cent to settle at 54,481.84. The broader NSE Nifty went higher by 87.70 points or 0.54 per cent to 16,220.60.
Larsen & Toubro was the top gainer in the Sensex pack, rising 4.72 per cent, followed by PowerGrid, NTPC, ICICI Bank, Axis Bank, Dr Reddy's, Bharti Airtel and Nestle India.
In contrast, Tata Steel, IndusInd Bank, Maruti Suzuki, TCS, Wipro and Asian Paints were among the laggards, shedding up to 1.62 per cent.
"The present rally is driven partly by expectations that given the steady decline in commodity prices, inflation will start showing a declining trend enabling central banks to go a bit slow on hiking rates, and partly by short covering," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
On a weekly basis, the Sensex advanced 1,573.91 points or 2.97 per cent, while the Nifty climbed 468.55 points or 2.97 per cent.
"The higher probability of a global slowdown caused by high inflation and higher rates has been talked about more in the last couple of weeks.
But the recent fall in the prices in commodities, especially oil, and the expectation that central banks may go slow on the interest rate hike, have brought back some confidence in the mind of the investors.
"The rise in the equity markets witnessed in the last few trading sessions of this week was based on this outlook of probable moderation in inflation, and therefore of rates.