But federal bonds ended lower as traders pocketed profits ahead of key weekly inflation data, which will be released around midday on Friday.
Inflation was at a three-and-a-half-year high of 7.96 percent in the week to August 7 and has climbed in recent months mainly due to a rise in the cost of fuel and commodities, a bulk of which India imports. A Reuters poll yielded a median inflation rate estimate of 7.83 percent for the year to August 14.
The 30-share Mumbai Stock Exchange index rose 0.92 percent to 5,135.45 points, and has gained 2 percent over the last three sessions.
"There is a slight positive bias in the market, so the index is rising on any good news - like lower oil prices and the passing of the Finance Bill today," said C.K. Narayan, a technical analyst at ICICI Securities.
"But concerns about oil price volatility and inflation remain, and the index will remain ranged until mid-September."
US light crude dipped below $43 per barrel for the first time since early August as supply concerns eased after data showed unchanged stocks of gasoline in the United States, but traders remained wary about renewed violence in Iraq.
A truckers' strike which entered its sixth day, pushing up food costs and threatening to hit industrial output, also added to inflationary woes.
But falling oil prices boosted refiners and auto makers. Bajaj Auto Ltd, the No 2 motorcycle maker, rose 2.8 percent and Bharat Petroleum Corp climbed 4 percent.
Software services firms improved on the strong debut of Tata Consultancy Services Ltd and Nasdaq gains, with No 2 exporter Infosys Technologies Ltd rising 0.6 percent and Wipro Ltd, the No 3 exporter, up 1.5 percent.