MUMBAI (Reuters) - The BSE Sensex gained for the week after declining in the two previous weeks, rising 1.1 percent on Friday, after Congress-led coalition's key ally Mamata Banerjee won elections in West Bengal, leading to hopes of stability in New Delhi.
But the market closed off earlier highs as the coalition suffered a huge loss in another poll as graft scandals hit government support.
Financials led the gains.
The 30-share BSE index closed 1.07 percent, or 195.49 points, higher at 18,531.28 points, with 27 of its components advancing.
It had risen as much as 2.1 percent in the day. It managed to post a 0.1 percent gain for the week.
"The market rose partially due to the election effect and as global cues improved," said R. K. Gupta, managing director of Taurus Mutual Fund.
"The election results will lead to some stability at the centre. It gives the Congress more muscle to push through its reforms."
Some, however, were of the opinion that regional allies may force Congress to make some bargains and compromises to fit in their demands.
Foreign funds have bought Indian equities in small quantities in three sessions to May 11, but their overall interest has been subdued and they have been net sellers of more than $1 billion of stocks since April 25.
The 50-share NSE index gained 1.1 percent to 5,544.75 points.
Advancing shares outnumbered declining ones in the ratio of 1.7 to 1 on a volume of 544 million shares on the NSE, lower than the 90-day average daily volume of 642 million shares.
Financials firmed up, with the sector index gaining 1.2 percent after shedding 1.6 percent in the previous session.
Leading lenders State Bank of India, ICICI Bank and HDFC Bank gained between 0.3 percent and nearly 2 percent.
Cigarette-to-hotels business ITC rose 2.8 percent, banking on the country's strong consumption appetite.
Metal producers gained as base metal prices edged up in international trade. Oil, gold and copper rose on Friday as a weaker dollar and strong euro zone growth figures enticed investors into battered commodities, although caution remained ahead of U.S. inflation data.
Sterlite Industries, Hindalco and Tata Steel rose between 0.5 percent and 1.6 percent.
By 1022 GMT, the MSCI world equity index was up 0.3 percent, while the Thomson Reuters global stock index gained 0.1 percent.
* Coal India rose 1.4 percent to 387.15 rupees, after the world's largest coal miner said late Thursday its 2010/11 fiscal year net profit rose by 24 percent.
* Dr Reddy's Laboratories firmed 4.1 percent to 1,664.25 rupees after the drugmaker said its consolidated quarterly net profit doubled, topping street estimates, boosted by strong sales in the United States.
* Rain Commodities jumped 8.1 percent to 197.50 rupees it said its March-quarter profit soared to 260.9 million rupees from 31.2 million earlier.
Reporting by Ami Shah; editing by Aradhana Aravindan