Software shares led India's benchmark index higher on Thursday as investors bet an erratic monsoon would not hurt the sector's strong earnings growth.
But worries about rains in the farm-dependent economy cast a shadow over the rupee, partly helping push it to a 3-week closing low, while bonds ended just shy of 15-month lows amid gloom over a proposed tax on securities trades and a firmer rate outlook.
"Infosys gave very good results earlier this week so investors are extrapolating for the others' earnings as well," said Srividhya Rajesh, fund manager at Madras-based Sundaram Mutual Fund.
"With the rupee also depreciating slightly in recent months and the sector insulated from monsoon worries there are no real negatives. Techs are seen as a good defensive bet right now."
Defensive buying of technology issues and strong demand for steel stocks saw the 30-issue Bombay share index close up 0.82 percent at 4,888.19 points. It fell more than 2 percent in the previous 2 days, partly on concerns over delayed rains.
A research agency's forecast of below-normal rainfall this monsoon has sparked concerns about economic growth, overshadowing weather officials' forecast that oilseed- and rice-growing states would start receiving rainfall in the next few days.
Economists are worried that erratic rains could slow down India's $560 billion economy, which grew at a scorching 8.2 percent after last year's bountiful monsoon, to under 7 percent if rural incomes falter in Asia's fourth-largest economy.
Federal bonds finished near lows not seen on a sustained basis since April 2003 as investors chose to encash their holdings amid worries about a proposed tax on securities transactions and the medium-term outlook for interest rates.
The yield on the benchmark 10-year bond ended more than 8 basis points higher at 5.9472 percent.