The BSE Sensex and the Nifty snapped a three-session losing streak to gain nearly 2 percent on Friday, after Reliance Industries surged on hopes one of its blocks held higher gas reserves while lenders rallied after easing wholesale inflation raised hopes of a rate cut.
Shares also tracked a rally in Asian markets following a bruising selloff in global markets, which had sent the rupee to record lows and pushed the Sensex down 1.3 percent for the week.
Investors are now looking ahead at the Reserve Bank of India's policy review on Monday as the next key trigger, along with movements in global markets.
Although most analysts expect the RBI to keep rates on hold, an outside chance was seen after the headline inflation slowed for a fourth straight month in May to 4.7 percent from a year earlier.
"The RBI meeting on Monday will be an important trigger for the market. Expectations are mixed on whether the RBI will cut rates or not," said Dipen Shah, head of Private Client Group Research, Kotak Securities.
Markets are pricing in some roll-back of stimulus by the U.S. Federal Reserve as well, but if it maintains status-quo, there can be further respite to the markets, added Shah.
The benchmark Sensex rose 1.86 percent, or 350.77 points, to end at 19,177.93, marking its biggest single-day gain since May 15, although it was not enough to prevent the index from posting its second consecutive weekly fall.
The broader Nifty rose 1.92 percent, or 109.30 points, to end at 5,808.40, closing above the psychologically important 5,800 level but 1.2 percent lower for the week.
Reliance Industries Ltd gained 3.2 percent after its KG-D6 block partner Niko Resources Ltd said its proved reserves increased by 160 percent, and that a recent gas discovery in the D6 block off the east coast could add significantly to future reserves.
Lenders rallied after easing wholesale inflation raised rate cut hopes. The NSE banking index fell 2.5 percent for the week, a fourth consecutive weekly drop.
ICICI Bank Ltd gained 3.1 percent and Axis Bank Ltd rose 2.2 percent.
Tata Motors Ltd gained 4.9 percent ahead of unit Jaguar Land Rover Ltd's global wholesale numbers expected later in the day.
Tata Coffee Ltd climbed 6.3 percent on value buying after falling 25 percent in previous two sessions.
Maruti Suzuki Ltd shares rose 4 percent on value buying after falling about 8 percent in the last five sessions. Traders also say the yen looks overbought versus the dollar in the short term and therefore may weaken, generating a tactical buy call on Maruti.
However, among stocks that fell, Apollo Tyres Ltd fell 5.5 percent, losing about a third of its market value over two days as investors fretted over the debt it will take on to fund its $2.5-billion acquisition of U.S.-based Cooper Tire & Rubber Co .