Indian shares pare gains, yields rise as federal budget begins

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai
A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 26, 2016. REUTERS/Shailesh Andrade/File Photo

BENGALURU, Feb 1 (Reuters) - Indian shares pared early gains on Wednesday, while bond yields moved higher as the country's finance minister presented the Union budget, saying the government will focus on economic growth and job creation with a global slowdown in the vicinity.

The Nifty 50 index (.NSEI) and the S&P BSE Sensex (.BSESN) pared early gains of nearly 1%. The Nifty was up 0.4% at 17,748, while the Sensex rose 0.5% to 59,873 as of 11:25 a.m. IST.

Finance Minister Nirmala Sitharaman said the outlay for capital spending has been upped 33% to 10 trillion rupees in 2023-24.

The benchmark 10-year yield rose after the higher capex allocation. The yield was at 7.3772% as of 11:35 a.m. IST from 7.3535% before the start of the budget announcement.

The Indian rupee inched up against the U.S. dollar to 81.78 against 81.86 before the budget.

This is the last full-year budget before the national elections in 2024 and key state elections later this year.

The Indian government will likely seek to lower its fiscal deficit, while offering incentives for investment to taxpayers.

"The big number markets will look out for is how (much) the government is going to spend on the infrastructure and capital goods side," said Saurabh Jain, assistant vice-president, research, SMC Global Securities.

"Also, investors will watch how the government will improve the rural demand and on the employment side," he added.

Banks (.NSEBANK) and financials (.NIFTYFIN) were the top gainers among the 13 major sectors, rising 1.1% and 1.2%, respectively.

India has pegged its economic growth at 6-6.8% in the 2023/24 fiscal year, the slowest in three years, at its pre-budget economic survey released on Tuesday.

Traders will also watch the budget for incentives to bring back foreign investors, who have piled out of the market.

Foreign institutional investors have sold 288.52 billion Indian rupees ($3.53 billion) worth of shares on a net basis in 2023 so far, according to official data.

Meanwhile, most Adani Group stocks dropped, extending their losses since short-seller Hindenburg Research's report and despite the group completing a $2.5 billion share sale a day earlier.

Reporting by Bharath Rajeswaran and Nallur Sethruaman in Bengaluru; editing by Eileen Soreng, Savio D'Souza and Janane Venkatraman

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