The rupee gained by almost 1 per cent, while the Sensex rallied more than one per cent, as Moody's Investor services upgraded India's sovereign rating.
The Sensex was last see higher by 280 points, over Thursday's close at around 3 pm.
Global rating agency, Moody's Investor Service has upgraded India's sovereign rating to Baa2 from Baa3 and changed the outlook on the rating to stable from positive.
"The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term," Moody's Investor Service said.
Rupee jumps one per cent
The rupee gained one per cent in trade following the rating upgrade. The currency was last seen trading at 64.85 to the US dollar, a jump of 53 paise over Thursday's close.
The sharp gains at one stage were as much as one per cent. Most analysts feel that the currency at this stage maybe overvalued and once the news dies down, there could be some drop in the currency, should crude oil prices react adversely. Check currency rates here
IT stocks slump
IT companies tend to lose, when the currency gains. Even large pharma stocks, which derive bulk of their revenues from exports saw a drop in their share prices.
Meanwhile, shares of HDFC Life got listed on the bourses at a premium of 8 per cent and was last seen trading at Rs 314. The company had issued its shares at a price of Rs 290.
Banking shares gain
Analysts see some selling pressure that could emerge for the markets at higher levels, as bulls may not want to keep positions opens ahead of the weekend.