The Sensex and the Nifty rose around 2 pct each on Friday after the government announced a hike in diesel prices and after the Federal Reserve announced a new asset purchase programme.
State-owned oil companies led the rally after the diesel price hike. Bharat Petroleum Corp Ltd surged 4.6 percent.
Banks also rose on expectations the government's fiscal consolidation steps would increase chances of a rate cut from the RBI. State Bank of India rose 4.4 percent.