Sensex surges more than 300 points ahead of budget

MUMBAI (Reuters) - The BSE Sensex and Nifty gained 1.5 percent on Friday, heading for their best single-day advance in nearly six weeks as blue chips rallied on hopes the government would deliver a budget that increases public investment but sticks broadly to its fiscal deficit targets.

The government's economy survey reiterated India would not overshoot its deficit target of 4.1 percent of gross domestic product in the current financial year ending March. It also stood by a medium-term target of cutting it to 3 percent of GDP.

The survey will be the basis for the 2015/16 federal budget to be unveiled by Finance Minister Arun Jaitley on Saturday.

"I think markets are quite confident about the budget. I think the budget will underline the various initiatives that the government has taken and going to take, which will cheer up the economy," said Deven Choksey, managing director, KR Choksey Securities.

Indian stock markets will be open for trading on Saturday because of the budget.

The benchmark BSE Sensex gained 1.5 percent to 29,173.56 and the broader Nifty added 1.54 percent, heading towards their best single-day gain since Jan. 20.

Stocks and sectors like infrastructure, expected to get preference in the upcoming budget, rallied as traders put speculative bets. GMR Infrastructure surged 6.7 percent.

Larsen & Toubro gained 4.5 percent, its best single-day gain since June 2, 2014, after the company, along with three others, were shortlisted for a defence contract worth 500 billion rupees ($8.1 billion).

Other shortlisted companies also gained. Tata Power Co Ltd gained 4.1 percent, Bharat Electronics Ltd added 4.4 percent and Rolta India Ltd surged 16 percent.

($1 = 61.8475 rupees)

(Reporting by Indulal PM; Editing by Subhranshu Sahu)