Sensex Pares Gains; Cap Goods Surge on Budget Proposals

The BSE Sensex and Nifty were trading flat on Monday as advances in capital goods stocks on positive proposals in the Budget and gains in banks were offset by declines in heavyweights such as ITC.

India will increase investment in infrastructure by Rs 70,000 crore ($11.35 billion) in the fiscal year 2015-16, Finance Minister Arun Jaitley said on Saturday, when presenting the government's full-year Budget.

Adding to the concerns, a private survey showed manufacturing activity expanded at its slowest pace in five months in February. The HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, fell for the second consecutive month, to 51.2 in February from 52.9 in January.

Ratings agency Standard & Poor's does not expect an upgrade to India's sovereign debt rating in the next year in the absence of substantial, quality reforms, it said on Monday, days after the government's Budget slowed the pace of fiscal consolidation.

"The outlook is positive, but we are waiting for a consolidation before initiating a fresh buy as market has spiked up before the Budget," said Suresh Parmar, head of institutional equities at KJMC Capital Markets.

The benchmark BSE index was up 0.08 per cent at 29,384.61 after gaining as much as 0.73 per cent. The broader Nifty was 0.49 per cent higher at 8,946.40. It gained as much as 0.79 per cent.

Capital goods stocks rose after the proposal to reduce corporate tax rate in Budget helped spur gains in capital goods companies. Larsen and Toubro advanced 4.2 per cent, while Bharat Heavy Electricals Ltd added 4.4 per cent.

Axis Bank surged 5 per cent, while HDFC Bank gained 1.2 per cent.

However, shares in ITC plunged over 5 per cent after the Budget raised excise duty on cigarettes by 25 per cent for cigarettes of length not exceeding 65 mm, and by 15 per cent for cigarettes of other lengths.