Sensex rallies for 5th straight week; up 164 points (Weekly market review)

Key indices of Indian equities markets rallied for the fifth week in a row, with the benchmark Sensex gaining 164 points in the weekly trade as a sharp drop in inflation boosted hopes of an early rate cut by the Reserve Bank of India.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended the week at 20286.12 points, up 0.81 percent or 163.80 points from its previous week close at 20286.12 points.

This is the fifth straight week of gain in the benchmark Sensex and the highest closing level in two-and-a-half years.

The Sensex has rallied 25.59 percent in the last one year. In the past one month it has gained 6.68 percent.

The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) also rallied for the fifth straight week. It ended the week at 6,187.30 points, the highest level in 30 months.

The markets rallied this week on positive inflation data that boosted the hope for monetary policy easing by the central bank.

India's headline inflation fell to 4.89 percent in April, the lowest level since November 2009, according to data released by the ministry of commerce and industry early this week.

Inflation has come within the comfort zone of the Reserve Bank of India (RBI) for the first time in almost three-and-a-half year. A sharp drop in inflation has fuelled hope that the central bank cut the interest rates early.

Interest rate sensitive banking, realty and capital goods stocks rallied sharply on hopes of monetary policy easing.

The BSE banking index surged by 4.09 percent in the weekly trade. The country's biggest private sector lender ICICI Bank surged almost 6 percent this week. The lender hit the highest level since November 2010.

The BSE realty index advanced 5.93 percent and capital goods index climbed 4.30 percent.

Sustained buying by the overseas investors led the rally at the markets. Foreign investors were the net buyers for 22 trading sessions in a row. Overseas investors have pumped in almost $13 billion in the Indian equities markets so far this year, according to the Securities and Exchange Board of India (SEBI) data.

Two major public sector firms State Bank of India and Coal India are scheduled to announce their financial results next week. These earning are likely to dominate the market sentiments.

Negative outlook on India's sovereign ratings is also likely to weigh on the market sentiments during the week beginning Monday.

Global ratings agency Standard & Poor's (S&P) Friday said its outlook on India remained negative and there was a one-in-three chances of a downgrade within the next 12 months.