MUMBAI (Reuters) – The BSE Sensex rose 0.7 percent on Monday after the budget stepped up social spending, but absence of key reforms such as opening up the retail and financial sectors caused some dismay.
Finance Minister Pranab Mukherjee forecast the economy would grow 9 percent in 2011/12 beginning April and inflation would ease. Asia's third-largest economy is on track to expand 8.6 percent in the current fiscal year.
The minister raised the foreign investment limit in corporate infrastructure bonds by $20 billion, and announced the creation of infrastructure debt funds, boosting shares such as top engineering and construction firm Larsen & Toubro.
"This looks like a sensible budget in the sense that the government has set a very aggressive deficit reduction target, which is better than the market expectations," said Sam Mahtani, a London-based fund manager with F&C's Indian Investment Company.
"There was no big announcements today on reform, but every thing else was neutral to positive with the government also announcing new measures to attract more foreign capital flows into the country," he said.
Leading carmaker Maruti Suzuki Ltd rose 3.1 percent to 1,206.70 rupees and No. 1 utility vehicle maker Mahindra & Mahindra gained 3.2 percent to 614.10 rupees after excise duty on cars were not raised.
Coal India rose 12.4 percent to 328.15 rupees after the world's largest coal miner said it would get $1.4 billion in additional revenue next fiscal year and saw realisations go up 12.5 to 13 percent from a revision in prices.
Cigarette maker ITC Ltd firmed 8.2 percent to 169 rupees, its biggest gain in more than one-and-a-half years, after there was no increase in taxes on tobacco makers.
"The finance minister has done a good balancing job, there is nothing spectacular in the budget but nothing disturbing as well," said Jagannadham Thunuguntla, head of research at SMC Capitals in New Delhi.
The benchmark 30-share BSE index, or Sensex, ended up 0.69 percent at 17,823.40 points. It had climbed as much as 3.4 percent at one stage, but the absence of reforms in retail and financial sectors caused investor dismay.
Sixteen components of the index closed in the positive zone.
Volume stood at a moderate 286 million shares, with gainers outpacing losers in the ratio of 1.3:1.
"The fiscal deficit target is the most encouraging part in the budget. The disinvestment target of 400 billion rupees also indicates that the government plans to move aggressively on that front," Thunuguntla said.
Share sales in India touched nearly $25 billion last calendar year, the best for Indian equity issuances since 2007, mainly boosted by the part divestment in state-run firms such as Coal India and NMDC.
Oil retailers Indian Oil and Bharat Petroleum rose between 2-2.5 percent after the finance minister said the government would provide $4.4 billion cash subsidy to state-run firms for selling fuel at below market rates.
The broader 50-share NSE index ended 0.56 percent higher at 5,333.25 points.
STOCKS THAT MOVED
* Airline companies Jet Airways, Kingfisher Airlines and SpiceJet fell 0.9 percent to 4.8 percent after the government decided to raise service tax on air travel.
* Sesa Goa extended losses to more than 7 percent and hit a 52-week low after the government decided to increase iron ore export duty to 20 percent.
* GE Shipping and Essar Shipping rose 3.5 and 3.4 percent respectively, after the finance minister said the government would give full exemption from import duty on spare parts and capital goods for shipowners and ship repair units.
MAIN TOP THREE BY VOLUME ON BSE
* Birla Power on 8 million shares
* Unitech on 7.7 million shares
* Coal India on 6.6 million shares
(Editing by Ranjit Gangadharan)
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