Indian shares rise on I-T boost, yields fall on borrowing plan

Indian shares surged on Wednesday after the government raised the minimum tax rebate limit and stepped up spending, while bond yields moved lower after gross borrowing for the next financial year was lower than expected in the Union budget.

The Nifty 50 index was up 1.7 per cent at 17,962.25, while the S&P BSE Sensex gained 2 per cent to 60,724.54 as of 12:58 p.m. IST.

Indian bond yields reversed course after the government announced gross borrowing at Rs 15.43 lakh crore ($188.75 billion) for the next financial year and net borrowing at Rs 11.80 lakh crore.

A Reuters poll had pegged gross borrowing at Rs 16 lakh crore.

The benchmark bond yield dropped much as 11 basis points from the day’s high levels, while the Indian rupee rose slightly against the dollar.

Finance Minister Nirmala Sitharaman said the government will spend Rs 10 lakh crore ($122.3 billion) on longer-term capital expenditure in 2023/24, extending a strategy adopted to revive growth in the aftermath of the Covid crisis.

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She also raised the rebate limit for personal income tax to Rs 700,000 from Rs 500,000, sending shares higher.

India's federal government cut down the fiscal deficit target to 5.9 per cent of GDP in the next financial year, compared to 6.4 per cent for the current fiscal year.

"On one side, they have reduced taxation, which could lead to feel-good factor in terms of consumption. At the same time, capex investment is very crucial, as it has a multiplier effect for growth," said Atul Suri, chief executive at Marathon Trends PMS, and fund manager, Rare Enterprises.

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

"Running into the elections in little over a year, this budget implies that the government has decided to write the cheques earlier than people expected, which is a positive," Suri added.

Banks and financials were the top gainers among the 13 major sectors, rising 3.3 per cent and 3.1 per cent, respectively.

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

Shares of seafood company Avanti Feeds Ltd and Coastal Corporation rose 5.8 per cent and 4.8 per cent respectively after Sitharaman announced plans to raise spending on the fisheries sector.

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.