The Sensex resumed higher at 19,977.38 after SEBI eased investment norms for overseas entities in government debt, but weighed down as inflation soared to a six-month high and closed nearly flat on Monday.
     
Inflation, as measured by the wholesale price index, came in at 6.1 percent in August compared with 5.79 percent in July, the highest level since February.      

The Sensex rallied to almost 3-year high to 20,739.69 on Thursday after the US Federal Reserve unexpectedly left its stimulus programme unchanged, easing fears of capital outflows. The decision may attract investments in most emerging markets, including India, this year.
     
However, the Sensex fell on profit-booking from operators on the last day of the week to end sharply higher by 530.95 points or 2.69 percent at 20,263.71 from 19,732.76 last weekend after RBI Governor Raghuram Rajan on Friday unexpectedly raised a key interest rate to combat inflation and partially rolled back liquidity tightening measures.
    
The RBI raised the short-term policy repo rate to 7.5 percent from 7.25 percent, saying inflation had to be lowered to more tolerable levels. The move may increase interest rates on home and auto loans.

(Agencies)

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