HDFC Bank and a clutch of other financial stocks were the top boost to the NSE Nifty 50 index, which closed 0.68% higher at 12,859.05 after a more than 1% drop on Thursday. The S&P BSE Sensex ended 0.65% higher at 43,882.25.
The two benchmarks have gained more than 10% in November, the best month so far this year for inflows from foreign institutional investors, on the back of positive COVID-19 vaccine trial results and a better economic outlook than before.
Barclays on Thursday lifted its fiscal 2022 growth forecast for the Indian economy to 8.5% from 7%, while Moody's projected a smaller contraction than earlier for fiscal 2021.
Sectors including banking, autos, real estate and metals have seen much stronger gains than the early winners in the pandemic such as drugs or IT, suggesting investors are betting on a faster business recovery.
Among companies, Reliance Industries, shares in which have doubled since their March lows, fell 3.7% and extended its loss for the month to 7.5%.
Gland Pharma shares rose as much as 23% in their market debut.
World stocks edged higher on Friday as hopes of economic recovery ahead helped offset the blow dealt by news that the U.S. Treasury was ending emergency loan programmes.
(Reporting by Sachin Ravikumar in Bengaluru; Editing by Shinjini Ganguli)