The BSE Sensex rose for a fourth straight day on Thursday, closing at their highest level in more than a month as expectations of a rate cut at the Reserve Bank of India's (RBI) upcoming annual monetary policy review continued to keep sentiment bullish.
Shares were also buoyed by positive global sentiment on hopes major central banks will ease monetary policy further or continue to keep it loose for long.
The weak inflation print in March and the recent declines in oil and gold prices have stoked hopes of at least a 25 basis point cut in benchmark interest rates at the RBI's annual policy review on May 3.
"If the current rally has to sustain, good news has to come in from the RBI policy. Monsoon forecast would also add to the current growth versus slowdown conundrum," said Deven Choksey, managing director, KR Choksey Securities.
"Political uncertainty would, however, remain a joker in the pack," he added.
The benchmark BSE index rose 1.19 percent, or 227.49 points, to 19,406.85, its highest close since March 15. The broader NSE index rose 1.36 percent, or 79.40 points, to 5,916.30, its highest closing level since March 11.
Asian shares rose with recovering commodities and views that a run of weak global economic data will encourage major central banks to keep or deepen their monetary stimulus improving risk sentiment, but weak data undermined the dollar.
Jet Airways Ltd closed up 10.8 percent as profit-taking crept in after the stock rose almost 20 percent in pre-open trades on its $379 million stake sale deal with Etihad.
The deal set a valuation benchmark for further investment in Indian airlines, with budget carrier SpiceJet Ltd frequently the subject of stake sale reports.
SpiceJet closed up 18.2 percent, while Kingfisher Airlines Ltd gained 0.7 percent.
Dr. Reddy's Laboratories Ltd gained as much as 5.2 percent to an all-time high of 2,000 rupees before closing up 4.8 percent on hopes growth in the domestic market would remain strong.
Other pharmaceutical firms also gained with Lupin Ltd closing up 1.7 percent and Sun Pharmaceutical Industries Ltd ending higher 3.1 percent.
Idea Cellular Ltd gained as much as 4.2 percent on expectations earnings for the January-March quarter due after market hours would beat estimates, but later gave up gains to close 1.4 percent higher.
Rate-sensitive banking stocks also continued to gain on rate-cut hopes. Axis Bank Ltd finished up 4.1 percent after better-than-hoped March quarter results, while ICICI Bank Ltd rose 1.4 percent ahead of its results on Friday.
The government's hefty cash holdings, now parked at the central bank, may soon be deposited at commercial banks, sources told Reuters.
The move would add liquidity to the banking system and make monetary policy more effective by making it easier for banks to cut lending rates and was also a factor boosting banks.
Among the losers, technology shares which have been falling after disappointing results and guidance continued to see more selling, possibly on the back of roll-over of short positions on the last day of the April derivatives contract expiry.
The NSE technology index has lost nearly 16 percent since the start of the current downtrend on April 12.
The Nifty has gained 4.1 percent since the expiry of the last derivatives contract on March 28.
Infosys Ltd fell 1.5 percent, while Tata Consultancy Services dropped 2 percent and Wipro slipped 2.1 percent.