The easing of monetary policy, combined with healthy foreign fund inflows, boosted investors' sentiments to lift the key equity indices around 1 percent during the last trading week.

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Additionally, positive vibes from announcements like the farm package and enhancement of tax rebate limit, made in the interim Budget, and some healthy quarterly results gave the upward thrust to the market.

However, a sharp sell-off towards the end of the week triggered by stock-specific volatility and rupee depreciation capped the gains.

Consequently, the S&P BSE Sensex rose 289.79 points, 0.8 per cent, over the week to end at 36,546.48 points.

The broader NSE Nifty50 finished at 10,943.60, up 1 per cent or 112.65 points from its previous week's close.

In a surprise move that could bring down home and auto loans, the RBI went the whole hog by not only lowering its key lending rate by 25 basis points (bps) to 6.25 per cent, but also turned accommodative, changing its monetary policy stance from "calibrated tightening" to "neutral", even as industry hailed the decision.

A policy rate cut would lead to lower interest rates for loan seekers and hence lift demand in the market.

"RBI's monetary policy was in line with expectation with a change in stance to neutral, but rate cut was a surprise," said Geojit Financial Services' Head of Research Vinod Nair.

"Benign inflation outlook and the possibility of further ease in key rates will help to revive credit growth which is positive for rate sensitive stocks," Nair said.

D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors said: "Investors too looked worried about a broadening global economic slowdown, with sentiment not helped by the absence of any positive signs for a resolution in the US-China trade row despite a surprise reduction in key interest rates by the RBI."

"Actually continued stress in the NBFC space and corporate governance issues hitting several companies have impacted sentiments of the investors. The December quarter results, except Tata Motors, which were reported so far by the India Inc. were a mixed bag, but largely on the positive side," Aggarwal said.

Increase in foreign funds flow during the week also aided the equity market gains. Foreign institutional investors (FIIs) bought stocks worth Rs 2,265.23 crore in the week ended Friday, whereas domestic institutional investors (DIIs) sold stocks worth Rs 11.58 crore.

On the currency front, the rupee depreciated by 6 paise to 71.31 against the US dollar over the previous week.

Sector-wise, the top sectoral gainers for the week were media, IT and bank Nifty indices, the while top losers were metals, infra and realty indices, said Deepak Jasani, Head of Retail Research at HDFC Securities.

The top gainers on the Sensex were Bajaj Auto, which rose 9.43 per cent during the week ended Friday, followed by Hero MotoCorp and Kotak Mahindra Bank that ended higher by 4.45 per cent and 2.98 per cent, respectively.

The major losers were Tata Motors, Tata Motors-DVR and NTPC, which ended 16.75 per cent, 13.35 per cent and 5.84 per cent down, respectively, on a week-on-week basis.