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Indian shares rise 1.8 pct on budget hopes

Published: 12 Feb 2009 23:04:52 PST

* Investors bet on stimulus plan to boost growth

* Reliance Ind, banks, engineers lead gains

* Interim railway budget due at 0530 GMT (Updates to mid-morning)

MUMBAI, Feb 13 - Indian shares rose 1.8 percent on Friday as investors speculated on a fiscal stimulus package in an interim general budget on Monday and supported by firmer Asian markets.

Traders said expectations an interim railway budget, scheduled to be presented to parliament at 11 a.m. (0530 GMT), would propose lower freight rates also underpinned sentiment.

Top-listed Reliance Industries <RELI.BO>, financial stocks and engineering firms Larsen & Toubro <LART.BO> and Bharat Heavy Electricals <BHEL.BO>, all rose as investors built position on expectation for government measures to bolster a slowing economy.

"There is optimism linked to some expectations around the budget," said Amitabh Chakraborty, president for equities at Religare Securities.

At 10:55 a.m. , the main BSE stock index <.BSESN> was up 1.78 percent at 9,633.87 points, after having risen as much as 1.85 percent. Twenty-nine of its components were trading higher.

The Congress-party led coalition government is expected to provide tax breaks and other incentives to boost spending and save jobs ahead of general elections due by mid-May.

India's industrial output fell 2.0 percent in December from a year earlier, and its economy is forecast to be expanding at its slowest pace in six years.

Investors were bullish on financial stocks, betting on a rate cut next week that would boost treasury income and boost demand.

Top lender State Bank of India <SBI.BO> rose 2.3 percent to 1,186 rupees, ICICI Bank <ICBK.BO> added 2.1 percent at 430 and HDFC Bank <HDBK.BO> firmed 1.5 percent to 945.40 rupees.

Engineering and power sector-related shares rose on hopes the government would step up spending on infrastructure projects.

Larsen & Toubro added 1.8 percent to 694.80 rupees, BHEL rose 2.4 percent to 1,446.70 rupees and state-run NTPC <NTPC.BO> gained 1.2 percent to 182.10 rupees.

Energy giant Reliance Industries, which shed more than 3 percent in the past two sessions, rose 2.1 percent to 1,380 rupees.

In the broader market, 1,266 advances led 437 declines on low volume of 73.6 million shares.

The 50-share NSE Nifty index <.NSEI> was up 1.7 percent at 2,942.60 points.