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Indian shares advanced on Thursday to close the fiscal year with weekly and quarterly gains in a holiday-shortened week, led by financials after the central bank eased recently tightened rules for lenders' investments in alternative investment funds.

The blue-chip NSE Nifty 50 index rose 0.92% to 22,326.90, while the BSE Sensex settled 0.90% higher at 73,651.35.

The Nifty 50 has gained about 29% in the year ending March 31, its best performance in three fiscal years.

The benchmark has advanced 2.74% in the January-March quarter, extending gains for four straight quarters in a row, besides logging a second straight weekly gain of 1.04%.

While the outlook remains positive, corporate earnings, likely Fed rate cuts and election results in India and the U.S. will influence markets in fiscal 2025, said S Krishnakumar, director at Lion Hill Capital.

Twelve of the 13 major sectors logged gains on the day.

The Reserve Bank of India (RBI) on Wednesday relaxed norms, brought in December, that had mandated that lenders set aside higher provisions if they bought into alternative investment funds, that, in turn, invested in the lender's borrowers.

As a result, high-weightage financial services rose 0.95%, while banks, state-owned lenders and private lenders added between 0.35% and 3%.

Heavyweights Bajaj Finance and Bajaj Finserv rose 3.17% and 4.07%, respectively, after news reports said housing finance arm Bajaj Housing Finance is mulling a potential initial public offer.

The reports of the likely listing of the housing finance arm is a positive trigger for Bajaj Finance, as it would lead to value unlocking, analysts added.

Among individual stocks, drug maker Biocon gained about 3% on the UK regulator's nod for its diabetes drug.

Technology company Cyient added 2.75% after announcing a partnership with Deutsche Aircraft.

Indian markets will be closed on Friday, for a holiday, and trading will resume on Monday, April 1.