Indian stocks nudge up ahead of budget

* Shares climb more than 0.5 pct on budget hopes

* Larsen & Toubro rises on higher infra spend

* Bank shares up on financial sector reforms

(Updates to mid-morning)

MUMBAI, July 6 (Reuters) - Indian shares rose 0.5 percent on Monday morning as investors awaited the announcement of the federal budget which is expected include further steps to spur economic growth.

Top engineering and construction firm Larsen & Toubro (LART.BO: Quote, Profile, Research) led gains on expectations the budget will focus on infrastructure projects.

"Until the budget announcement the market will be range-bound. But even after that I do not see much of an upside...my opinion is that the market will go down after the budget," said R.K.Gupta, chief executive of Taurus Mutual Fund.

The new government will present the 2009/10 budget at 0530 GMT and is expected to expand both the budget deficit and its market borrowing requirement to support growth.

Expectations are also growing that it will also announce measures on financial sector reforms, stake sale in state-run firms as finance minister Pranab Mukherjee faces with a tough task given the deficit and mounting expectations for sops from industries.