The S&P BSE Sensex rose as much as 387.5 points during the session to touch 36,194.78 at the day's highest point, while the Nifty50 climbed 113.8 points to register an intraday high of 10,893.60.

Thirty eight out of the 50 stocks on the Nifty finished the session higher. Prominent gainers on the index included Titan (+4.11 per cent), Sun Pharma (+3.37 per cent), Indian Oil (+3.21 per cent) and Bajaj Finance (+2.08 per cent).

Sun Pharma (+2.98 per cent), Bajaj Finance (+2.13 per cent), Vedanta (+1.76 per cent), HDFC (+1.72 per cent), Yes Bank (+1.68 per cent) and ICICI Bank (+1.59 per cent) led the advances on Sensex.

Analysts say reports of capital infusion in the PSU banks boosted the sentiment. "Markets are up on the news of fresh infusion of capital in public sector banks," said Anuj Gupta of brokerage Angel Broking.

The government is set to release 28,615 crore rupees towards a fresh tranche of state-run bank recapitalisation, news agency Reuters had reported on Thursday citing sources.

The Nifty PSU Bank Index, meanwhile, ended 1.02 per cent higher. While SBI and Bank of Baroda closed 0.8 per cent and 1.8 per cent higher respectively, Syndicate Bank, Union Bank of India and Carara Bank rose 2.4-3.7 per cent.

"I think PSU banks' results for the December-quarter will be keenly watched. If a couple of them do well, good operational performance, it could be a big boost to the markets," said Krish Subramanyam, co-head, equity advisory, Altamount Capital. "However, in the near term, it may be difficult for Nifty to cross 11,000," he said.

The rupee strengthened by as much as 37 paise against the dollar to touch an intraday high of 69.98. Brent crude futures - the international benchmark for crude oil - recovered nearly 2 per cent on Friday, a day after it declined more than 4 per cent.

On a net basis, foreign portfolio investors (FPIs) bought shares worth Rs 1,731.91 crore on Thursday, while domestic institutional investors (DIIs) were net sellers to the tune of Rs 663.00 crore, provisional data available with NSE showed.