Bangalore:India’s main stock index was trading up more than 1% on Tuesday, pulling back from its biggest one-day drop in six months a day earlier after the annual budget disappointed investors.
Trading was, however, choppy with the index slipping into the negative briefly as concerns about the government’s finances weighed.
Leading cigarette maker ITC Ltd, ICICI Bank and engineering and construction major Larsen and Toubro led the gains.
Bharti Airtel gained 2.7% to Rs805 after the market regulator said India’s leading mobile operator was considering issuing global depositary receipts to South Africa’s MTN.
The two companies have been in exclusive talks that could lead to a merger creating the world’s No. 3 wireless group with more than 200 million subscribers and combined revenue of $20 billion.
At 11:27am, the 30-share BSE index was up 0.78%, or 109.57 points, at 14,152.97, with 17 stocks rising. The index rose as much as 1.5% in the opening deals and then fell 0.3% into the negative. The broader 50-share NSE index was up 0.78% at 4,198.05.
Analysts said some foreign investors were buying front-line stocks on hopes the government will continue with key reforms despite not spelling out a clear roadmap in the budget.
“The budget content was not as bad as it was made out to be,” Samir Arora, who manages nearly $200 million in Indian equities at Singapore-based fund Helios Capital, said. “I have a positive bias on the market and waiting for the things to happen.”
Investors had betted on a market-friendly budget after Prime Minister Manmohan Singh’s ruling coalition was re-elected in mid-May with a bigger mandate.
The main stock index fell 5.8% on Monday after the budget fell short of expectation on infrastructure spending, ignored financial sector reforms, raised a minimum alternate tax for companies and set a paltry stake sale target, traders said.
Citigroup said Monday’s sharp fall was a result of factors like fairly high expectations on investments, taxes and policy impetus.
“While we believe expectations weren’t specific enough and were in nature fairly generalised, the lack of big bold policy and investment announcements probably came as a disappointment,” it said in a report.
“We don’t believe there are any fundamental shortcomings of the budget on this count - just a possible let-down against a backdrop of high expectations.”
The BSE index is up about 47% so far this year, after a three-quarters rally from its 2009 low in early March, and analysts said some institutions might have used the budget disappointment as a trigger to consolidate their portfolio.
ITC was trading up 6.7% at Rs211, after having climbed 8.6 percent to its highest in more than a year.
Bank of America-Merrill Lynch said it had upgraded its EPS estimates for ITC by 3% in this fiscal year and 4% in the next year after the budget left excise duty on cigarettes unchanged versus its forecast of a 5% increase.
Shares in Larsen rose 2.5% to Rs1,501.10, after the budget increased spending to infrastructure sectors, traders said. The stock had dropped nearly 9% on Monday.
The trend was negative in the broader market with losers overwhelming gainers by almost 2 to 1 on relatively moderate volume of 135 million shares.