Indian shares rose for a third consecutive session on Wednesday to hit their highest in nearly 2-1/2 months, as financial stocks continued to rally on the back of quarterly results, while sentiment was aided by optimism ahead of the federal budget.
Strong earnings from lenders such as HDFC Bank this week have raised optimism that the impact of India's move to ban higher-value currency notes could be less than expected.
Still, analysts expect India's annual budget, due on Feb. 1, to provide incentives to some sectors to help support economic growth.
"Markets are generally getting excited about results declared by some finance companies as the numbers have not shown any major impact of demonetization," said Dipen Shah, senior vice president, public client group research, Kotak Securities.
The broader NSE Nifty was up 0.53 percent at 8,520.65 by 0603 GMT, while the benchmark BSE Sensex was 0.47 percent higher at 27,502.98. Both indexes were trading around their highest levels since Nov. 10, 2016.
Indian financial markets will be closed on Thursday for a public holiday.
Financials contributed to a majority of the gains on the NSE index, led by a 3 percent rise in Housing Development Finance Corp. Indian Overseas Bank and Bharat Financial Inclusion Ltd rose as much as 5.71 percent and 7.82 percent, respectively, after reporting results late on Tuesday.
Shares of Kotak Mahindra Bank Ltd, IDFC Bank Ltd and Indian Bank Ltd were up more than 1.50 percent each ahead of quarterly results later in the day.
Biocon Ltd rose as much as 5.21 percent to its highest since Jan. 12 after posting a 65 percent jump in third-quarter consolidated profit on Tuesday.
Among decliners, Bharti Airtel Ld fell as much as 3.63 percent after the company on Tuesday reported its lowest profit in four years.
(Reporting By Darshana Sankararaman in Bengaluru; Editing by Sunil Nair)