Sensex closed up 312.81, or 1.8 per cent, at 17,600.12, its highest value since February 28. The gauge of 30 companies rose 2.8 per cent this week, paring the year-to-date decline to 13 per cent.
The S&P CNX Nifty rose 62.3 points, or 1.2 per cent, to 5,228.2. State Bank, the nation's largest by assets, rose to its strongest level in more than seven weeks. ICICI Bank, the No. 2, advanced the most in more than a month.
Jaiprakash Associates, the third-ranking construction company by revenue, climbed to its best in more than nine weeks after telling investors sales and profit may double this year.
"I am not negative on the market in any way and I am expecting it to go up further," said Mehraboon Irani, senior vice president for portfolio management services, who oversees $100 million in equities.
India's inflation accelerated at the fastest pace in more than three years, vindicating the central bank's decision to order commercial lenders to increase reserves twice last month.
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Wholesale prices rose 7.57 per cent in the week ended April 19 from a year earlier, after gaining 7.33 per cent in the previous week, the Ministry of Commerce and Industry said in New Delhi on Friday.