Equity benchmark indices Sensex and Nifty surged on Friday in line with a global market rally amid rising hopes that the US Federal Reserve will cut interest rates next week.

Optimism over a successful conclusion of India-US trade talks has also fuelled a rally in markets.

Rallying for the fifth day in a row, the 30-share BSE Sensex jumped 355.97 points or 0.44 per cent to settle at 81,904.70. During the day, it surged 444.12 points or 0.54 per cent to 81,992.85.

The 50-share NSE Nifty rallied 108.50 points or 0.43 per cent to 25,114, registering its eighth straight day of uptrend.

"The domestic market closed at a three-week high, supported by renewed global optimism over a potential Fed rate cut. Sentiments improved further on reports that the EU may reject US tariff proposals on India for buying Russian oil.

"Progress in US-India trade talks is also expected to keep the positive momentum intact in the near term. The defence sector outperformed, aided by the Indian procurement authorities beginning negotiations for six next-generation conventional submarines," Vinod Nair, Head of Research, Geojit Investments Limited, said. 

On the weekly front, the BSE benchmark jumped 1,193.94 points or 1.47 per cent, and the Nifty climbed 373 points or 1.50 per cent. In eight trading days, the Nifty has jumped 534.4 points or 2.17 per cent.

From the Sensex firms, Bharat Electronics, Bajaj Finance, Bajaj Finserv, Axis Bank, Maruti and Tata Motors were among the gainers.

However, Eternal, Hindustan Unilever, Trent and Titan were the major laggards.

The BSE smallcap gauge climbed 0.27 per cent, and the midcap went up marginally by 0.09 per cent.

"Positive trends in Asian equities, coupled with a mild decline in crude oil prices, further supported risk appetite," Gaurav Garg, Research Analyst, Lemonn Markets Desk, said. 

In Asian markets, South Korea's Kospi, Japan's Nikkei 225 index and Hong Kong's Hang Seng settled in positive territory, while Shanghai's SSE Composite index ended lower.