The S&P BSE Sensex extended gains for the second consecutive session on Friday, rebounding strongly by 204 points in the late afternoon session after a weak opening.
The Sensex closed at a eight-week high of 27,215 points, up 0.76%, while the 50-share Nifty rose by 59 points, or 0.72%, to end at 8,238.
The rebound was largely led by renewed buying in banking, capital goods and oil & gas stocks. The markets were also supported by positive global markets on the back of waning expectations over interest rate hike by the US central bank this year.
"After enjoying a solid rally in the previous trading session, the Indian equity market took the momentum forward as the Nifty ended above the 8200 mark for the first time since August 21, 2015. The stellar upswing was led by Capital Goods, oil & gas and the banking stocks," said Amar Ambani, Head of Research, IIFL.
Chinese stock markets rose to a seven-week high, as upbeat bank lending data for September lessened fears over slowdown in the economy. The benchmark Shanghai Composite Index ended 1.6% at 3,391.35 points.
"It is encouraging to see that loan structure improved with medium-long term corporate loans jumping to CNY356bn, from CNY122bn in August. This suggests that the central government's efforts to counter the local bureaucratic inaction and push for starts of infrastructure investment may be taking effect," said Barclays Capital in a note.
Other major Asian markets gained on positive Chinese economic data, with Japan's Nikkei closing over 1% higher and Hong Kong's Hang Seng index gaining 0.78%.
Among the BSE sectoral indices, Bankex, Capital Goods and Oil & Gas were the top gainers, while Reality was the top loser.
SBI, L&T, BPCL, Yes Bank, Asian Paints, ACC, Maruti Suzuki and HDFC were among the gainers, while Lupin, Adani Ports, Idea Cellular, Bank of Baroda, Tata Steel and HUL were the major losers.
The stock price of Nestle India, the manufacture of Maggi noodles, ended nearly 6% higher at Rs 6,551 after the company said that the tests conducted at labs mandated by the Bombay High Court show that the instant food is safe for consumption, raising hopes that the company may soon start selling Maggi noodles.
Nevertheless, the company said that it would resume selling Maggi noodles "only after the newly manufactured products are also cleared by the designated three laboratories."
"The coming week being a truncated one will be choppy; a number of larger companies will also announce their earnings. We expect HDFC Bank to deliver a resilient performance for Q2 FY16 with loan growth at 21%, stable NIM and benign asset quality trends. The NII and PAT are estimated to increase by a healthy 18% yoy and 20% yoy respectively," Ambani said.
"HCL Tech will likely report a weak quarter with tepid dollar revenue growth of 0.8% qoq and operating margin contracting by 50bps qoq. Hero Motocorp Q2 FY16 results are likely to be weak with a PAT decline of 10% yoy on the back of decline in sales volumes. On the other hand Bajaj Auto is expected to see a sharp yoy jump in PAT on the back of margin gains driven by rupee depreciation," he added.
On the commodity front, gold prices ended Rs 150 lower at Rs 27,150 per 10 grams, while silver prices fell Rs 160 to close at Rs 37,420 per kg.