The BSE benchmark Sensex rose over 150 points, extending gains for the fourth day in a row on sustained buying by funds as well as retail investors, largely in tandem with a firming trend on other Asian bourses.
However, the country's slowing economic growth, which slipped to 4.4 per cent, restricted the gains.
The 30-share barometer gained more than 150 points to trade at 18,795 points with PSUs, banking, FMCG, metal and consumer durables sector stocks leading the rally. It had rallied by nearly 652 points in the past three sessions.
Similarly, the wide-based NSE index Nifty moved up 0.98 per cent.
Banks gain on hopes of potential reversal of RBI's liquidity tightening measures announced in July, dealers say.
Lupin Ltd gains 2 per cent on hopes of a key drug launch later in the month, analysts say.
Brokers said reports of a firming trend on other Asian bourses on the back of strong manufacturing data from China mainly influenced the trading sentiments here but country's slowing economic growth in April-June quarter, restricted gains.
The country's economic growth rate in the April-June quarter of current fiscal slipped to 4.4 per cent, the slowest in at least four years.
In the Asian region, the Japan's Nikkei rose 0.37 per cent, while Hong Kong's Hang Seng gained one per cent in early trade.
The US Dow Jones Industrial Average ended 0.21 per cent lower in Friday's trade.