The BSE Sensex rose nearly 1 percent on Thursday to close at its highest in 1-1/2 months after Axis Bank surged on better-than-expected June-quarter results, sparking a rally in other banking stocks as well.
Axis results, which follow those of Infosys
The gains have soothed some investor concerns sparked by the Reserve Bank of India's move on Monday to raise short-term interest rates to shore up the rupee, which sent bond yields surging and raised worries about the potential economic fallout.
Meanwhile, the government announced lifting caps on foreign investment in some sectors, but the measures failed to improve sentiment given concerns about their implementation and expectations they would not immediately yield overseas flows.
Investors now remain on watch for upcoming blue-chip earnings results and more potential measures from policy-makers to stem the slide in the rupee.
"Earnings remain on radar alongside monsoon session to see if reforms announced so far can go through the parliament," said Deven Choksey, managing director at K R Choksey Securities.
0.9 percent, or 179.68 points, to end at 20,128.41, marking its highest close since May 30.
The Nifty rose 1.08 percent, or 64.75 points, to end at 6,038.05, clocking a second consecutive session of gains.
Private-sector lender Axis Bank
Oil and Natural Gas Corp
Consumer goods and pharmaceuticals shares extended gains to record highs, benefiting from their defensive nature in an uncertain market environment and from confidence about their growth prospects.
Among pharmaceutical stocks, Sun Pharmaceutical Industries
However among stocks that fell, Tata Consultancy Services