Finance Minister Pranab Mukherjee said today that he sees reflections of an economic revival in the current market rally.

The 30-scrip Sensex, the Bombay Stock Exchange’s benchmark index, ended just short of 17,000 at 16,886 after touching an intra-day high of 16,943 while the National Stock Exchange’s Nifty crossed the 5,000-mark for the first time in 16 months.

“This (market rally) signals positive indications for the Indian economy,” Mukherjee told The Indian Express. “The world economy is reviving and we also have indications from various sectors within the Indian economy to suggest revival. I see this being possibly reflected in the market. However, we are watching the situation closely and cautiously.”

The Finance Minister’s comments come on the back of an uptick in growth as reflected in the index of industrial production (IIP) numbers for July.

IIP data last released on September 11 for July showed 6.8 per cent growth in factory output. With September bringing rains in the northern plains and encouraging advance tax collections, the ministry is hoping that the revival can be sustained during the second half of the financial year. Industry as a whole managed to grow 4.6 per cent compared with 5.6 per cent a year ago with 15 of 17 industry groups registering a positive growth in July 2009.

Even as exports have been dipping for almost 10 months in a row, the decline has started moderating. Merchandise shipments dropped 28.4 per cent from a year earlier to $13.6 billion in July this year after sliding 27.7 per cent in June. Retail investors have booked profits and pulled out as much as Rs 10,000 crore in 2009. The Sensex shot up 73.5 per cent (or 7,094 points) from 9,647.31 on December 30, 2008, to 16,741.30 as on September 18, 2009. Over Rs 2,659 crore of this outflow has come in the month of September.