MUMBAI: Indian shares rose nearly 1 percent on Wednesday, heading towards their highest close in 1-1/2 weeks on optimism that India, which imports almost a third of its crude requirements, would benefit from weak oil prices on the back of the Iran nuclear deal.
Blue-chip stocks rose on hopes lower crude oil prices would help India control its twin deficits and inflation, thereby creating headroom for the central bank to ease borrowing costs further.
Oil prices dipped on Wednesday as the market prepared for a gradual increase of Iranian exports into an already oversupplied market from 2016 after six world powers and Tehran reached a nuclear deal on Tuesday.
Under the deal, sanctions imposed by the United States, the European Union and the United Nations are to be lifted in exchange for curbs on Iran's nuclear programme.
"If the oil cost comes down, overall impact would come on the Reserve Bank of India's credit policy straight away because I think inflation would remain under control," said Deven Choksey, managing director, KR Choksey Securities.
Choksey added the overall economy would benefit from low oil prices as it would kickstart infrastructure projects and also bring down the cost of funds.
The BSE Sensex gained 0.96 percent while the Nifty rose 0.87 percent, holding above the psychologically important 8,500 level.
The Greek parliament's vote on EU-prescribed austerity measures later in the day is also being keenly watched.
Blue-chips led the gains. Reliance Industries rose 1.2 percent while Infosys gained 1.4 percent.
Maruti Suzuki's shares gained as much as 3.2 percent to mark a record high of 4,179.95 rupees after Credit Suisse increased its target price on the stock and maintained its "outperform" rating.