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Shares of automakers and consumer companies advanced after the government said state-run banks would increase lending to the sectors. Benchmark stock indices swung between gains and losses.
TVS Motor, a motorcycle maker, jumped 8.8 per cent. Tata Motors, the nation's biggest automaker, rose 1.4 per cent after Deutsche Bank upgraded the stock. Whirlpool of India, which manufactures refrigerators and washing machines, climbed to the highest level in seven weeks.
The BSE's Sensex rose 13.88 points or 0.07 per cent to close at 19,915.95. The BSE's auto index rose 0.9 per cent, while consumer durables index gained 0.4 per cent.
Increased lending in the auto and consumer durables industries will help boost demand, the government said in a statement. Asian equities fell amid a budget impasse in the US, the world's largest economy.
"Auto and consumer durable companies are moving up on the government's measure to boost demand," said Alex Mathews, the head of research at Geojit BNP Paribas Financial Services in Kochi.
Foreign institutional investors (FIIs) net-bought shares worth Rs 541 crore on Friday, according to provisional data. In the first three days of October, these investors bought to the tune of Rs 555 crore.
The Sensex has advanced 2.3 per cent this year and is trading at 13.7 times projected 12-month earnings, compared with the five-year average of 14.1 times. The index's 50-day volatility measure, a gauge of price swings, reached the highest level in two years on Thursday. The MSCI Emerging Markets Index is trading at 10.5 times forecast profits.
The US Treasury warned on Thursday that failure to raise the government's $16.7-trillion debt limit before its borrowing authority expires on October 17 could result in a recession as bad or worse than the 2008 financial crisis. BlackRock Inc's Laurence D Fink and Pacific Investment Management Co's Bill Gross said the US budget stand-off will be resolved without a debt default. The US accounted for 13 per cent of India's exports in June, according to the commerce ministry.
"The larger picture remains cautious, on the back of concerns over the US debt ceiling," said Kaushik Dani, a fund manager with Peerless Mutual Fund, which has about $725 million in assets.
