The market ushered in the New Year with a bang as both the key indices, Sensex and Nifty, continued their bull run for the second week in a row and attained their highest levels in nearly two years on the back of US budget deal and positive growth in service and manufacturing sectors in the country.

The market resumed trading on a cautious note after investors decided to play safe as US lawmakers were trying to reach a pact to avoid the ‘fiscal cliff’ of over $600 billion in spending cuts and tax hikes.

The US Senate approved an agreement on Tuesday to help the world’s biggest economy avert the fiscal cliff. The deal boosted the world stock markets, including the Indian bourses.

The proposal would extend tax rates on annual household income under $4,50,000 and postpone automatic spending cuts for two months.

Barring FMCG index, which closed in the red, other sectoral indices gained between 0.96 per cent and 5.19 per cent during the week with realty, PSU, oil & gas and consumer durable leading the pack.

The Bombay Stock Exchange 30-share barometer showed a weak trend on the first day of the week, but then went on a gaining spree to settle up 339.24 points, or 1.74 per cent, at 19,784.08, a level not seen since January 6, 2011.

Similarly, the wide-based S&P CNX Nifty of the NSE spurted by 107.80 points, or 1.82 per cent, to settle above 6,000 level for the first time after two years at 6,016.15.

State-run oil companies gained on hopes that a proposed revision in the Government’s pricing formula would boost gas prices. Additionally, Oil Minister M Veerappa Moily has allowed RIL and Cairn India to explore for oil and gas within the producing fields subject to certain conditions.

Besides, India’s manufacturing sector growth improved further in December, registering the fastest pace in 6 months, driven by a strong pick up in new orders, an HSBC survey said.

With manufacturing PMI (Purchasing Managers Index) up and prices trending down, experts said data augurs well for the economy.

“PMI data suggest that the manufacturing sector, after stabilising between July and October, began to improve from November, and inflation pressures remain under check,” said Sonal Varma, India economist, Nomura.

Finance Minister P Chidambaram on Wednesday said that the Government is considering steps to reduce gold import by making it more expensive. The yellow metal is a major constituent of India’s rising current account deficit (CAD).

Traders said moves to stem gold demand are structurally positive for the economy’s fiscal health.

The global markets began 2013 with gains as all major bourses in the world ended the week on a positive note. The positive sentiment was generated by the agreement reached by the US lawmakers to avert a financial crisis.

Second-line stocks outperformed the Sensex (which gained 1.74%). The BSE Small cap and Mid cap indices ended with weekly gains of 3.72 per cent and 3.12 per cent respectively.

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