Indian shares rose on Thursday, led by lenders such as State Bank of India , after the country`s upper house of parliament passed a new bankruptcy code to address corporate debts and improve the ease of doing business.

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Shares also recovered from falls on Wednesday as investors concluded that India`s amendment of a tax treaty with Mauritius would be manageable for markets given capital gains would be taxed only for future investments. 

"Today banking stocks are leading the race, mainly because of the bankruptcy bill approval," said Rikesh Parikh, vice-president of equities at Motilal Oswal Securities. 

"Investors are taking it (Mauritius tax treaty) positively: that instead of retrospective taxation in the past, this time government has taken a step which is prospective."

The broader NSE Nifty gained 0.57 percent to 7,893.12 as of 0651 GMT. It had closed 0.49 percent lower on Wednesday after falling as much as 1.36 percent during the day.

The benchmark BSE Sensex rose 0.63 percent to 25,757.48. 

Banking stocks rose, with the S&P BSE Bankex rising more than 1 percent. State Bank of India and ICICI Bank were up 2 percent and 2.8 percent, respectively. 

Asian Paints rose 2.2 percent after its January-March results provided comfort on its volumes and margins. 

But among the decliners, Hindustan Unilever fell 1 percent on profit-booking after two consecutive sessions of gains in which its shares rose about 2 percent. The consumer goods firm on Monday posted upbeat March-quarter results.