The S&P BSE Sensex opened higher on firm Asian cues and went up to the day's high of 20,932.23.
It stayed in positive territory through the day and ended at 20,882.89, up 467.38 points or 2.29 per cent, completing its third week of gains. The Sensex was at the highest close since 20,932.48 on November 9, 2010.
Shares also got a boost on speculation the US Federal Reserve would maintain its monetary stimulus until next year.
"Markets rose sharply on Friday, buoyed by the postponement of the debt ceiling issue and on likely expectations that the Fed will not taper the stimulus programme in its next meeting, pending final resolution of the debt ceiling programme," said Dipen Shah, Head of Private Client Group Research at Kotak Securities.
Investors on the BSE were richer by Rs 1.07 lakh crore.
The 50-share CNX Nifty on the National Stock Exchange rose 143.50 points, or 2.37 per cent, to end at 6,189.35, the highest level since 6,194.25 on November 11, 2010.
Most Asian stocks rose as China's GDP growth rebounded, dispelling fears of a slowdown. China's economy expanded 7.8 percent in the three months ended September, up from a two-decade low of 7.5 percent in the previous quarter.
The rupee climbed to a two-month high of 60.92 against the dollar in the morning amid sustained capital inflows from foreign funds. Overseas investors bought a net Rs 1,109.93 crore of shares yesterday, as per provisional data.
Key indices in Singapore, China, South Korea, Hong Kong and Taiwan were up, while Japan's Nikkei ended 0.17 per cent lower.
The other trigger for the markets will be the Fed policy meeting and RBI policy meeting at the end of the month. Markets are largely expecting another hike in interest rates from RBI, post the disappointing CPI numbers. Going ahead, results of the state elections in December will be an important determinant of the market movement in the months to come.
Dipen Shah, Head of Private Client Group Research, Kotak Securities: Markets rose sharply on Friday buoyed by the postponement of the debt ceiling issue and on likely expectations that the Fed will not taper the stimulus program in its next meeting, pending final resolution of the debt ceiling program. Benchmark indices gained nearly 1% for the week, largely on the back of Fridays gains.
The initial set of numbers from large IT and banking stocks have been largely along expected lines. Reliance results were also well received by the markets. The markets will now look forward to the remaining results, largely of the domestically focused sectors. Any disappointments in those results may lead to stock specific corrections. Management commentary on any improvement in ground level activity in the infrastructure segment, will be of interest to us.
Indian shares close at nearly 3-yr high; strong FII buying boosts sentiment
(Reuters) BSE Sensex gained more than 2 percent on Friday and jumped to its highest close in nearly three years as banks rose on value-buying while blue chips gained as foreign investors extended their buying streak to a tenth consecutive session.
Foreign institutional investors (FIIs) bought 11.09 billion rupees ($181 million) worth of Indian shares on Thursday, a tenth consecutive session of purchases that bought their total to 78.47 billion rupees ($1.28 billion), regulatory and exchange data show.
Sentiment was also bolstered after Life insurance Corp of India Chairman S.K. Roy told television channel CNBC TV18 the state-run insurer will invest 400 billion rupees ($6.53 billion) in domestic equities in fiscal 2014.
Gains also tracked global shares which rose to a five-year high on expectations the Federal Reserve will keep its stimulus in place for longer following the confidence-sapping U.S. fiscal impasse.
"You can't argue with liquidity, the flow of money seems to be pushing concerns such as weak macro, RBI and earnings on the back burner," said Deven Choksey, managing director at K R Choksey Securities.
The benchmark BSE index surged 2.29 percent, or 467.38 points, to end at 20,882.89, marking its highest close since November 2010. The index rose 1.7 percent for the week.
The broader NSE index rose 2.37 percent, or 143.50 points, to end at 6,189.35, marking its biggest single-day percentage gain in a month. It rose 1.5 percent for the week, notching up a third consecutive weekly gain. Banks were among the leading gainers, sending the NSE bank index up 3.95 percent. The bank index fell 17.2 percent in the September quarter.
ICICI Bank Ltd jumped 4.6 percent, while HDFC Bank Ltd rose 3.4 percent.
Blue chips also gained, with Reliance Industries Ltd rising 2.9 percent while Tata Steel Ltd surging 6.1 percent.
Larsen & Toubro Ltd rose 4.2 percent. The company after market hours reported a 7 percent rise in quarterly profit, beating analyst estimates, as it booked increased revenue despite a weak domestic economy.
Housing Development Finance Corporation Ltd rose 3.1 percent and Zee Entertainment Ltd ended 1.4 percent higher ahead of their July-September earnings results on Monday.
Sesa Sterlite Ltd rose 5.8 percent after UBS initiated coverage of the stock with a "buy" rating and a target price of 220 rupees, citing upcoming earnings drivers including stake purchase in cash-rich subsidiary Hindustan Zinc Ltd.
Some investors also bought defensive sectors such as drugmakers and consumer good stocks expecting uncertainty ahead of the RBI's policy review at the end of the month, where it is largely expected to raise the repo rate by 25 basis points, its second consecutive monthly hike.
Lupin Ltd gained 0.9 percent, while Sun Pharmaceutical Industries Ltd ended 1.9 percent higher. In consumer goods stocks, ITC Ltd rose 2.6 percent.
However, among decliners, Wockhardt Ltd fell 0.7 percent after Britain's Medicines and Healthcare products Regulatory Agency recalled five prescription-only drugs made by the company after it found deficiencies in manufacturing procedures at its Chikalthana factory.