The NSE Nifty 50 index ended 0.82% higher at 17,790.35, while the S&P BSE Sensex was up 0.82% at 59,677.83.
India's main stock indexes had dropped 1% each in the previous session after global equities fell sharply due to inflationary concerns stemming from sky-high oil prices.
On Thursday, however, world stocks rose after U.S. politicians appeared close to a deal to avert a debt default, Russia reassured Europe on gas supplies, and oil prices pulled back. [MKTS/GLOB]
"This is a fear of missing out rally. Such moves are typical of euphoria that is stemming from global factors and the rally should continue until there are fresh negative triggers, both locally or globally," said Suyash Maheshwari, a research analyst at Samco Securities.
Friday's outcome of the central bank's policy meeting and the start of corporate earnings season will now be on investors' radar.
Among individual shares and sectors, the Nifty's Auto Index rose as much as 5% -- the biggest since May 2020. Four of the top five gainers on the Nifty 50 index were auto stocks.
Tata Motors surged after Morgan Stanley Research upgraded the stock on expectations of encouraging annual earnings. It also said in a note that it expects 2022/23 to be strong for Indian autos.
Titan Company settled 10.6% higher after saying it sees strong revenue growth in the second quarter.
The Nifty's realty index rose 6.84% to scale a peak. Sobha Ltd soared 18.79%.
Piramal Enterprises closed up 1.6% after it said it was listing its pharmaceutical and financial services businesses as separate entities.
Meanwhile, Oil and Natural Gas Corp's four-day rally was halted by its 4.58% fall.
(Reporting by Chandini Monnappa in Bengaluru; editing by Uttaresh.V)