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India's blue-chip Nifty 50 stock index recorded its best monthly gains since November 2020, while the rupee surged against the dollar on Friday, as investors bet on a slower pace of U.S. interest rate hikes.

The NSE Nifty 50 index closed 1.35% higher at 17,158.25 while the S&P BSE Sensex rose 1.25% to 57,570.25, with both indexes settling at their highest in three months.

In July, the Nifty rose 8.7%, while the Sensex climbed 8.6%, helped by a sharp decline in crude prices that soothed inflation worries. The indexes are up around 2.6% each for the week.

Investor sentiment got a boost after a contraction in the U.S. economy for a second straight quarter raised hopes that the Federal Reserve may not opt for aggressive interest rate hikes.[MKTS/GLOB]

The focus has now shifted to the Reserve Bank of India's policy meet next week, which economists now predict will deliver a smaller rate hike than earlier expected.

The Indian rupee jumped 0.63% to 79.25 per dollar in its best session since August 27, 2021.

The Nifty Metal Index was the best performing stock sub-index, rising 3.9% banking on likely strong demand from top consumer China. Tata Steel advanced 7.2%.

The Nifty Auto index gained 1.3%, with TVS Motor Co up 4.3% after reporting strong profit.

SBI Life Insurance rose 8.6% and was the top gainer in the Nifty on a rise in quarterly profit, while drugmaker Sun Pharma jumped 5.4% after beating profit expectations.

Shares of industrial equipment maker GMM Pfaudler climbed 19.1% after reporting a 17-fold jump in quarterly profit.