The Indian stock markets ended on a strong note for the fourth consecutive trading session propelled by short-covering and positive investment data from China.

The Nifty closed at 5,550.75, up 79 points, while the Sensex finished at 18,886.13, 266.41 points higher than Friday’s closing price.

Investment sentiments received a boost after China said its manufacturing expanded in August at the fastest pace in more than a year. The HSBC purchasing managers' index climbed to 50.1 in August from 47.7 the month before.

In a note to investors, Sanjeev Prasad, Senior Executive Director & Co-Head, Kotak Institutional Equities, said: “The Government can resort to financial chicanery (postpone cash payments and burden the national oil companies with more subsidies) but that is unlikely to impress the markets (bond, currency and equity) or the rating agencies.”

“The Government’s recent measures to attract capital flows have failed to excite investors as seen in continued large equity and debt outflows. Our assumption of $15 billion of capital inflows in FY2014 is at large risk with FYTD outflows at $5.7 billion,” it added.

Among sectoral indices, Metals (3.16 per cent), FMCG (3.1 per cent) and Realty (3 per cent) were the top gainers on the BSE.

On Nifty, Jaiprakash Associates, IndusInd Bank and Tata Steel were the top gainers while Kotak Mahindra Bank, Mahindra & Mahindra and Tata Power were the main losers.

Volatility was down 5.44 per cent and the volatility index India Vix closed at 27.81.

The market breadth was positive. Out of 2,400 stocks traded, 1,397 stocks advanced while 854 stocks declined and 149 remained unchanged on the BSE.

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