Indian shares rose up to 1 percent in thin trade on Friday and were headed for their third straight session of gains, boosted by financials such as HDFC Ltd and as an extended rally on Wall Street lifted investor sentiment.
U.S. stocks gained for a second straight session on Thursday, bringing some much-needed respite for investors following losses earlier this month, when factors including concerns over the U.S.-China trade war, slowing global growth and wariness towards the U.S. Federal Reserve's rate tightening cycle took a heavy toll.
Financials accounted for more than half of the gains on the NSE index. HDFC was up 1.8 percent, while Yes Bank Ltd climbed 2.25 percent.
The Nifty PSU Bank Index rose 1.2 percent, in what could be its third session of gains in four. Union Bank added 3.4 percent, while Syndicate Bank gained 3.7 percent.
The government is set to release 286.15 billion rupees ($4.08 billion) towards a fresh tranche of state-run bank recapitalisation, a finance ministry source told Reuters on Thursday.
"I think PSU banks' results for the December-quarter will be keenly watched. If a couple of them do well, good operational performance, it could be a big boost to the markets," said Krish Subramanyam, co-head, equity advisory at Altamount Capital.
"In the near term, it may be difficult for Nifty to cross 11,000."
The broader NSE index was up 0.82 percent at 10,868.70 as of 0611 GMT, while the benchmark BSE index was 0.83 percent higher at 36,105.85.
Only four stocks were in the red on the 50-stock NSE index, with gains spread across major sectors.
Both the indexes were on track for their sharpest weekly gain this month, rising about 1.2 percent. The NSE index had been among the top performing stock indexes globally this year, as of Thursday, rising 3.3 percent.