PSUs drive market gains on hopes of higher govt spending in upcoming Budget

India's benchmark indexes advanced on Thursday, as state-owned companies gained on expectations of a government spending boost in the upcoming union budget, overshadowing a drop in IT stocks and Tata Motors.

The Nifty 50 settled 0.37 per cent higher at 23,249.5, while the BSE Sensex added 0.3 per cent to 76,759.81, marking their third straight session of gains. 

 

However, the Nifty is down 11.5 per cent from the record-high level hit on Sept. 27, hurt by a moderation in economic and corporate earnings growth.

The three-session rally in the benchmarks is aided by "attractive valuations" in large-cap stocks after the recent correction, offering a good margin of safety from a long-term perspective, said Gaurav Bhandari, chief executive officer at Monarch Networth Capital.

Nine of the 13 major sectors advanced on the day.

State-owned companies gained about 2 per cent, with analysts attributing the rise to expectations of government focus on public spending and infrastructure in the budget announcement on Saturday.

The second heaviest stock on the benchmark indexes, Reliance Industries rose 1.4 per cent.

The broader, more domestically focussed small-caps and mid-caps closed flat on the day.

They have lost 12 per cent and 8 per cent, respectively, in January so far, underperforming the 1.7 per cent drop in the Nifty 50.

"While the large-caps offer some safety to investors, elevated valuations and earnings concerns in small and mid-caps could trigger further selling pressure," said Nitin Bhasin, head of institutional equities at Ambit Capital.

IT index shed 1.1 per cent after tracking a global tech rally in the previous session to gain 2.6 per cent.

Among individual stocks, Tata Motors dropped 7.4 per cent after reporting a smaller quarterly profit, weighed down by weak car sales.

Adani Enterprises fell about 3 per cent after reporting its biggest quarterly profit slump in three years on weakness in its coal trading division.

Non-bank lender Bajaj Finance rose 2.1 per cent after posting a bigger quarterly profit due to strong loan growth.