Indian shares rose nearly three percent to hit three-week closing highs on Thursday as investors bought stocks on expectations of strong growth in Asia's third-largest economy.
There was no trading in the currency market as banks were shut for closure of accounts for the fiscal year to March.
Government bonds rose on expectations easy availability of funds will stoke a rally in coming weeks amid expectations of a declining trend in inflation.
The benchmark 30-issue Mumbai share index closed up 2.69 percent at 5,740.85 points, its highest close since March 10. The index has now risen about four percent in two straight sessions but is down 1.7 percent in 2004.
"A combination of factors are at play, and certainly the news of economic growth has helped sentiment," said Abhay Aima, the head of equities and private banking at HDFC Bank.
Government data on Wednesday showed the farm-dependent economy grew by 10.4 percent in the third fiscal quarter ended December, stoking hopes it expanded by more then eight percent in the full financial year to March.
Automobile stocks rose on expectations of strong sales in a booming economy.
Tata Motors Ltd, India's biggest truck and bus maker, gained 1.9 percent to 495.15 rupees while Ashok Leyland Ltd, its nearest rival, jumped 3.9 percent to 263.50 rupees.
Hero Honda Motors Ltd, the biggest motorcycle maker, spurted 2.3 percent to 501.80 rupees after it said bike sales in March jumped 66 percent from a year earlier to 192,181 units.
Maruti Udyog Ltd, India's biggest car maker, climbed 4.0 percent to 516.80 rupees after it said vehicles sales in the year ended March jumped about 30 percent to 472,122 units.