The Sensex rose to a 20-month high as India's factory output, measured by the Index of Industrial Production (IIP), soared to a 16-month high of 8.2 per cent in October.
However, it surrendered the gains on profit booking amid drop in exports for the seventh straight month in November.
Retail inflation rose to 9.90 per cent in November from 9.75 per cent in October, while WPI inflation declined to 7.24 per cent in November from 7.45 per cent in October.
"WPI inflation now looks on track to fall below 7 per cent by March, opening up space for RBI to trim policy rates, which look set to be reduced in January," said BNP Paribas Chief Asia Economist Richard Iley.
Investors were also enthused at the tail-end of the week by Finance Minister P Chidambaram's comment that government will take some more steps in the next few weeks to revive the economy and boost investment sentiments.
The 30-share Sensex resumed better and shot up further to a 20-month high of 19,612.18, but declined afterwards to a low of 19,193.11 before ending the week at 19,317.25, posting a loss of 106.85 points, or 0.55 per cent.
In straight three- week of gaining string, the key BSE index had spurted by 1,114.73 points, or 6.09 per cent. The NSE 50-share Nifty also declined by 27.80 points, or 0.47 per cent, to finish the week at 5,879.60.
Banking stocks saw some activity on hopes legislation on sectoral reforms would be passed during the current session of Parliament, said traders.
Foreign Institutional Investors (FIIs) continued their buying spree by investing net Rs 7,107.28 crores during the week, including provisional figure of December 14. Kishor P Ostwal, CMD, CNI Research said, "Nifty futures after testing 6000 in this week corrected as there were huge over leveraged long positions. Also there was some shift of liquidity from secondary market to large FPO/IPO making investors to take some profits and create new liquidity till the time refunds are granted".
"The global economy is going through a difficult phase as businesses, consumers and investors wait for clarity on a range of risks, from the outcome of fiscal negotiations in the US to the trajectory of growth in China. Euphoria will continue even Nifty past 6,000 or for that matter even after 6,200 new high," he added.
Eighteen scrips out of the Sensex pack ended lower, while 12 finished higher. Major losers from the Sensex pack were BHEL (7.41 per cent), NTper cent (4.53 per cent), Tata Power (4.51 per cent), Bharti Air (3.27 per cent), Hindalco (3.11 per cent), Coal India (2.55 per cent), HUL (2.40 per cent), Maruti (2.36 per cent), TCS (2.13 per cent) and L&T (2.05 per cent).
However, Bajaj Auto rose by 7.25 per cent followed by Jindal Steel 5.14 per cent, Tata Motors 3.58 per cent, Sun Pharma 2.44 per cent, Hero Motocorp 2.29 per cent, HDFC 1.83 per cent and M&M 1.39 per cent.
Among sectorial indices, the BSE-CD dropped by 4.65 per cent followed by BSE- ower 3.23 per cent, BSE-CG 2.59 per cent, BSE-PSU 1.68 per cent, BSE-Realty 1.65 per cent, BSE-FMCG 1.50 per cent and BSE-Teck 1.35 per cent.
Small-cap and Mid-cap indices underperformed the Sensex and dropped by 1.24 per cent and 1.01 per cent, respectively.
However, the BSE-Auto rose by 2.07 per cent followed by Bankex 0.58 per cent and BSE-HC 0.14 per cent.
The total turnover at BSE and NSE dropped to Rs 10,387.37 crores and Rs 64,486.65 crore, respectively from the last week's level of Rs 12,113.55 crore and Rs 64,751.03 crore.
Forex: The Indian rupee ended almost flat at 54.48 –down by just a paisa – against the Greenback during the week under review as dollar demand exceeded the supply. Rupee closed in negative terrain for the four out of five tradings days of the week while only on Tuesday it finished with gains.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced higher at 54.30 a dollar from last weekend's close of 54.47.
It later moved erratically in line with local equities in a range of 54.10 and 54.75 before concluding the week at 54.48, showing a minor fall of one paisa. Last week, it had dropped by 21 paise or 0.39 per cent.
Dollar demand from importers, mainly oil refiners, was little bit more than its selling by exporters, a dealer said.
Positive set of US data and poor economic reports from Europe restricted the gains in the rupee," a dealer said.
The rupee sentiment improved in the mid-week on better-than-expected trade deficit data. "The trade deficit for November narrowed marginally to USD 19.3 billion compared to USD 20.9 billion in previous month," said Chetan Ahya, MD and Asia Pacific economist at Morgan Stanley in a report.
Forex dealers said that the rupee fall was capped due to capital inflows that could be attributed to the Rs 4,500-crore IPO from Bharti Infratel, followed by over USD 1 billion stake sale in NMDC and may lead to a surge in flows soon.
The BSE benchmark Sensex dropped by 106.85 or 0.55 per cent in the week, while Foreign Institutional Investors (FIIs) picked up shares worth over USD 1.2 billion in first four days of the week, as per Sebi data.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,: "The rupee ended nearly flat during the week. The data heavy week on the domestic front registered one of the strongest rise in October Industrial production numbers rising from -0.7 per cent to a whopping 8.2 per cent from street hopes of 4.5 per cent."
"The lower base and the festival month boosted the demand for both durable and non durable goods resulting in rise in IIP numbers. The combined CPI numbers for both rural and urban consumers rose to 9.9 per cent from 9.75 per cent tightening the noose of RBI which was planning for a rate cut in the upcoming policy meet".
"The WPI Inflation numbers surprised the markets where the inflation drifted to a ten month low in November at 7.24 per cent lower than previous level of 7.45 per cent against the hopes of 7.60 per cent.
"The fall in inflation though is a good sign but still remains above the comfort zone of RBI and firming tone of CPI and softening stance of WPI has left the RBI in lurch over its rate cut decision," he added.
"The upcoming week marks some major economic numbers and events which shall impact the risk sentiments in both global and domestic markets.
"The much hyped RBI policy meet on local front where the RBI is expected to hold on to its rate cut decision for the new year citing uncomfortable levels of CPI and WPI numbers.
"For the week importers can create a partial hedge around the 54.25 - 54.00 levels for their payments and exporters can use the weakness towards 55.00 - 55.25 levels to initiate short hedge with a stop loss above 55.70 levels as to cover their receipts. "The crucial levels for INR appreciation are 54.20 levels and for depreciation the 55.00 levels can be closely watched as rise above 55.00 levels shall weaken the pair till 55.50 levels," he further commented.
The RBI fixed the reference rate for US dollar and euro at Rs 54.3880 and Rs 71.2920 from Rs 54.2018 and Rs 70.2175, respectively, in the last weekend.
The rupee premium for the forward dollar moved down on fresh receivings by exporters.
The rupee premium for the benchmark six-month forward dollar payable in May finished slightly lower at 164-165 paise from last weekend's level of 165-1/2-167-1/2 paise and far-forward contracts maturing in November ended down at 309-1/2-311- 1/2 paise as against 313-314-1/2 paise.
The rupee remained weak against Pound Sterling to end the week at 87.82 from previous weekend's close of 87.26 and also declined sharply against the euro to finish at 71.35 from last weekend's level of 70.38.
However, it bounced back against the Japanse yen to close at 65.04 per 100 yen from 66.14 last weekend.