Shares vaulted to a five-month high on Tuesday, driven by sharp gains in Bajaj Finserv and HDFC Life Insurance, as investors looked past a higher-than-expected inflation print.
The NSE Nifty 50 index was up 0.65% at 18,053, as of 0441 GMT, while the S&P BSE Sensex rose 0.65% to 60,503.02. Both indexes were set for their fourth straight session of advances.
Bajaj Finserv, a holding company for financial services businesses, surged as much as 7.6%, ahead of the record date for a stock split and bonus issue of shares.
Shadow lender Bajaj Finance, which is held by Bajaj Finserv, advanced 2.2%.
HDFC Life Insurance Company jumped 4.7% to its highest since June 9. Reuters reported on Tuesday that British asset manager abrdn plc would sell a stake in HDFC Life through a block trade on Tuesday.
The gains outweighed concerns over inflation accelerating to 7% in August, above both the 6.9% forecast in a Reuters poll of economists and July's 6.71%.
Higher-than-expected inflation may put pressure on the central bank to hike interest rates again later this month.
Meanwhile, industrial output in July rose a slower-than-expected 2.4%.
"A weak industrial print and CPI above the RBI's comfort zone are being weighed against continuous foreign investor buying, weak oil prices and a weakening dollar index," said Ajay Bodke, an independent market analyst.
"Risk aversion towards emerging markets is receding," Bodke added.
Aiding sentiment was a strong finish on Wall Street overnight and gains in Asian peers on Tuesday.
Investors are also eyeing U.S. inflation data that will give cues for interest rate outlook, and hopes are that it might offer another signal that inflation has peaked.
Meanwhile in domestic markets, Vedanta rose 1.9% to a mid-June high after Reuters reported the company had selected Indian Prime Minister Narendra Modi's home state of Gujarat for its semiconductor project.
