Stocks of IT companies, which earn a significant share of their revenue from the US, climbed 5.07%, their best week in 16 months.
The rise follows softer-than-expected US inflation data on October 14, which bolstered expectations that the Federal Reserve will not hike rates and may start cutting rates in May 2024.
“The environment is favourable for domestic and global markets,” said Rahul Sharma, head of research at Equity99.
Foreign inflows can fuel a sustained rally in domestic markets, Sharma added.
US Treasury yields fell after the inflation data, while foreign investors snapped a 15-session selling streak in the week.
The fall in oil prices is also a positive for net importers like India, analysts said.
Brent crude futures hit four-month lows and were set to decline for the fourth straight week. The Nifty oil & gas index gained 1.40%, rising for the third week in a row.
On the day, the Nifty 50 closed 0.17% lower at 19,731.80 and Sensex fell 0.28% to 65,794.73, dragged by financials.
Banks, financial services, public sector banks and private banks lost between 0.9% and 2.5%, amid concerns over the sector’s loan growth and profitability after the Reserve Bank of India (RBI) tightened rules for personal loans and credit cards.
State Bank of India, Axis Bank, Bajaj Finance were among the top Nifty losers, falling between 1.9% and 4%.
The more domestically-focussed small- and mid-caps hit fresh record highs, and outperformed the benchmarks on the day and the week, aided by retail inflows.