The S&P BSE Sensex index rose as much as 284.51 points in early trade to 37,611.87, and the broader NSE Nifty benchmark climbed to 11,121.85, up 89.4 points from the previous close. Buying across most sectors, led by banking and energy shares, supported the markets.
Friday's gains came a day after reports that the government is likely to exempt foreign portfolio investors from higher taxes triggered a surge in the markets.
At 9:18 am, the Sensex traded 207.10 points - or 0.55 per cent - higher at 37,534.46, while the Nifty was up 38.70 points - or 0.35 per cent - at 11,071.15.
Top percentage gainers on the 50-scrip index at the time were UltraTech Cement, Indiabulls Housing Finance, Power Grid and Tata Steel, trading between 1.20 per cent and 2.41 per cent higher.
Market breadth favoured gains, as 671 stocks on the BSE traded higher while 182 struggled with losses. On the NSE, 1,064 stocks advanced while 401 declined.
HDFC Bank, HDFC and Reliance Industries contributed the most to the advances in Sensex.
UltraTech Cement shares rose as much as 3.03 per cent in early deals, a day after the cement maker reported a standalone net profit of Rs. 1,199 crore in the quarter ended June 30, more than double compared to the corresponding period a year ago.
Debt-laden Dewan Housing Finance Corp (DHFL) said on Thursday that it may not be able to fulfill its debt obligations due in the near future, days after the company said its creditors would not have to take any haircut on principal payments under its resolution plan.
Equities in other Asian markets rose after an overnight in Wall Street, helped by China's better-than-expected export figures, but fresh concerns about US-China trade ties limited the upside.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 per cent but was on track to lose 2.3 per cent for the week. Japan's Nikkei average advanced 0.6 per cent, while Australian stocks stood flat and South Korean stocks gained 1 per cent.
Overnight on Wall Street, the S&P 500 registered its largest one-day percentage gain in about two months, with the Dow and the Nasdaq also climbing more than 1 per cent.
The Sensex and Nifty had ended 1.74 per cent and 1.63 per cent higher respectively on Friday, after a report by news agency Reuters cited an official as saying that the government is likely to exempt foreign portfolio investors from higher taxes.