After an ecstatic jump of 100 points in the afternoon trade, the Indian equity markets erased those gains but held those levels and closed in green.
The finance ministry said on Friday it will not question the validity of tax residency certificates (TRCs) held by foreign investors, while noting the current double-tax treaty with Mauritius remains in effect, pending continued talks.
Sensex closed at 18918.52, up 0.30 percent and the Nifty closed at 5719.70,up 0.47 percent.
The rupee also rose to 54.47/48 from a one-and-half month low of 54.73 reached earlier, as domestic shares recover from three-month lows hit on Thursday.
Indian banks recovered from steep falls in the previous session as analysts said the 2013/14 budget was unlikely to have as big a negative impact as investors had first anticipated. Shares in banks were hit by concerns about liquidity in the banking system after the government announced higher-than-expected borrowing and uncertainty about the impact from allowing private banks to participate in a scheme to provide low cost loans to farmers.
Deutsche Bank said the overall impact of the 2013/14 budget should be limited, given the government's "commitment" towards fiscal consolidation, while Motilal Oswal said the overall measures for the financial sector are largely positive.
State Bank of India closed 0.19 percent after dropping 6 percent on Thursday. ICICI Bank closed up 2
percent after slumping 3.95 percent in the previous session.
Stocks in news
Maruti Suzuki closed up 5 percent on Friday after reporting February sales largely in-line with expectations.
DLF closed down 6 percent amid weak sentiment and on fears that demand for premium housing may be hit after the 2013/14 budget introduced a 10 percent surcharge on taxpayers with annual income of more than 10 million rupees.
"The surcharge and less abatement in service tax will hurt the disposable income and affordability for premium housing," said an analyst tracking the sector.
Other premium housing developers also fall, with Oberoi Realty closed down 2 percent, Sobha Developers also closed down 2.1 percent.
With inputs from Reuters
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Updated Date: Dec 21, 2014 01:50:18 IST