Indian shares resumed their rally on Thursday after a brief one-session pause, with investors eyeing robust July-September earnings.
Federal bonds edged lower amid lingering concerns that interest rates could rise after the central bank moved to tighten banks' lendable surpluses at the weekend to tackle inflationary pressures and also hinted at more steps.
The 30-issue Mumbai share index closed up 1.06 percent at 5,477.68 points, to post its best close since May 10. The index, which snapped an eight-day rise the previous day, has risen 5.5 percent this month but is down 6.2 percent in 2004.
Gainers outpaced losers by about two to one as investors chased metal stocks, with the mood upbeat on expectations that demand would remain strong and inflation would ease from a 3-1/2 year peak in Asia's fourth-biggest economy.
"The quarterly results are expected to be strong and investors are pouring money ahead of that," said Chandan Desai, head of portfolio management at TAIB Securities. "The undertone is firm, though we expect bouts of profit taking."
Expectations that increases in wholesale prices would moderate also brought relief a day ahead of the weekly release of inflation data.
A Reuters poll on Thursday showed the inflation rate was expected to have fallen to 7.60 percent in the year to Sept. 4, down from 8.33 percent in the previous week.
Metal stocks gained on market talk that Tata Iron and Steel Company, nation's second-biggest steel maker, had paid a huge advance tax, raising expectations of strong growth in profits by other metal producers.
TISCO shares jumped 3.6 percent and industry leader Steel Authority of India Ltd. surged 5 percent.
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