Indian shares rallied on Friday to a five-month high on expectations of strong corporate earnings in an economy, which grew 7.4 percent in the year to April-June.
Bonds lost considerable ground after Thursday's economic data shored up a view that, with inflation sticky at around 8 percent, the central bank may raise rates sooner rather than later.
The 30-issue Mumbai share index gained 1.65 percent to 5,675.54 points, its best close since May 6. "There is a strong flow of money, both from retail and foreign investors," said Chandan Desai, head of portfolio management at TAIB Securities.
"As we head into earnings season, investors are hopeful of strong growth in corporate profits. And those who missed out on the early part of the uptrend are pouring in money."
Data from the capital market regulator showed foreign funds had bought a net $89.8 million worth of shares on Thursday, taking their total net purchases in September to $601.2 million.
Investors piled in to heavyweights like Reliance Industries Ltd, up 2.9 percent, and India's top exploration firm, Oil and Natural Gas Corp, which gained 3.9 percent.
Yields on the benchmark 7.37 percent 2014 bond rose to end at a six-week closing high of 6.3787 percent, up from Thursday's close of 6.2372 percent. It is the highest close since August 21, when it finished at 6.5485 percent.
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