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Indian stocks rose to a two-week high post budget

The Bombay Stock Exchange (BSE) building is seen in Mumbai, India, January 31, 2020. REUTERS/Francis Mascarenhas

On Wednesday, Indian stocks rose to a two-week high, powered by financial sectors, after the government increased expenditure to boost growth in the pandemic-hit economy, despite poor earnings from Tech Mahindra.

The news: As of 0541 GMT, the blue-chip NSE Nifty 50 index (.NSEI) was up 0.87 percent to 17,729.5, while the S&P BSE Sensex (.BSESN) was up 0.91 percent to 59,396.13.

What’s going on: After the federal budget announced additional investment of 39.45 trillion rupees in the coming fiscal year to create public infrastructure and support economic growth, the indices gained nearly 1.5 percent each on Tuesday. Bond yields had risen as a result of concerns about rising borrowing and the budget deficit.

What they’re saying: “The capex-driven budget will promote credit growth in the economy, so we may see benefits for the banking sector, which has been a laggard,” Anita Gandhi, director at Arihant Capital Markets, said.

  • “Rising yields, both worldwide and domestically, are the only source of concern. From now on, we’ll have to watch how international investment numbers add up.”
  • The benchmark 10-year bond yield jumped to 6.922 percent on Wednesday, up from 6.8279 percent the day before.
  • “Equities associated to the capex cycle and accompanying credit expansion are in the early stages of a growth cycle, with values nowhere near the exuberant levels seen in the market’s ‘growth and low volatility’ stocks,” ICICI Securities wrote in a note.
  • The blue-chip indexes are presently approximately 4.5 percent off record highs achieved in October, following a sell-off in recent weeks fueled by concerns about U.S. interest rates and inflation.
  • The benchmark 10-year bond yield jumped to 6.922 percent on Wednesday, up from 6.8279 percent the day before.
  • “Equities associated to the capex cycle and accompanying credit expansion are in the early stages of a growth cycle, with values nowhere near the exuberant levels seen in the market’s ‘growth and low volatility’ stocks,” ICICI Securities wrote in a note.

In addition: The blue-chip indexes are presently approximately 4.5 percent off record highs achieved in October, following a sell-off in recent weeks fueled by concerns about U.S. interest rates and inflation.

  • The Nifty Bank index (.NSEBANK) and the Nifty PSU Bank index (.NIFTYPSU) led sub-index gains, climbing 1.6 and 1.8 percent, respectively.
  • Bajaj Finance (BJFN.NS) increased by 3.7 percent, while Bajaj Finserv (BJFS.NS) increased by 5 per cent.
  • Tech Mahindra (TEML.NS) dropped 4.2 percent after the IT services firm missed quarterly profit projections due to increased personnel costs.

Housing Development Finance Corp (HDFC.NS), a major mortgage lender, rose 1.8 percent ahead of its quarterly results.

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