Brokers said heavy rain in some parts of the country today eased worries of a possible drought. A fall, though marginal, in retail inflation in July also boosted the sentiment.

Retail inflation declined to 9.86 per cent in July from 10.02 per cent in June.

Investors were also buoyed by Finance Minister P Chidambaram's asking banks on Saturday to cut interest rates and keep EMIs at affordable levels to encourage sale of consumer durables to restart the engine of manufacturing.

Eoin Treacy's view Most of what one hears about India these days tends to be rather negative. The views expressed range from impatience with corruption to stagnant government policies and persistently high inflation. The Rupee has been among the weakest currencies in the world over the last year and erratic policies on taxation have deterred foreign investors. Against this background it is easy to become disillusioned with the country as an investment destination, but India has a history of being forced by circumstances to adopt reforms.

Despite negative sentiment, the Sensex Index exhibits a rounding characteristic, consistent with accumulation. A sustained move below 16,500 would be required to question medium-term scope for additional upside.