Bengaluru: Indian shares jumped more than 3 per cent on Monday as Finance Minister Nirmala Sitharaman announced a slew of measures to revive the pandemic-hit economy, while bond yields rose after the government warned that fiscal deficit for 2020/2021 will be wider than expected.
Sitharaman proposed doubling healthcare spending, a vehicle scrappage policy, recapitalisation of public-sector banks and divestment of some state-owned lenders, aiming to bolster an economy that plunged into its deepest recorded slump amid the virus outbreak.
The blue-chip NSE Nifty 50 and S&P BSE Sensex indexes rose more than 3.5 per cent to 3.7 per cent after the budget.
The 10-year bond yield rose around 15 basis points to 6.09 per cent and the rupee weakened slightly after Sitharaman said India was targeting fiscal deficit for 2020/2021 at 9.5 per cent of GDP, wider than about 7 per cent expected earlier.
The government also announced additional market borrowing.
"The indications are that the government is doing more to promote growth rather than maintaining fiscal discipline. This is a welcome move as it will have a positive impact on growth," said Sujan Hajra, chief economist at Anand Rathi Securities.
The stock indexes had fallen for six straight sessions in the days leading up to the budget, after rocketing to record highs earlier in 2021 as India started a huge vaccination drive and as companies reported encouraging earnings.
The Nifty Auto index climbed 3.4 per cent on Monday following the new scrappage policy, while the Nifty PSU Bank index, which tracks state-run lenders jumped 6.4 per cent.
Banks were also supported as Sitharaman said India would set up an asset reconstruction company to take over toxic assets.
State Bank of India, India's largest lender by assets, rose as much as 7.8 per cent.
Insurers HDFC Life Insurance Co and ICICI Prudential Life Insurance Co rose between 5 per cent and 6 per cent after India raised the foreign investment limit in the insurance sector to 74 per cent from 49 per cent.
Surges in ICICI Bank and IndusInd Bank after quarterly earnings lifted the Nifty Bank index 6.8 per cent.
The blue-chip indexes recovered from a pandemic-induced plunge in March last year to finish 2020 around 15 per cent firmer, their best performance since 2017, fuelled by strong foreign inflows amid massive liquidity in global markets and vaccine hopes.
India's economy is seen clocking a robust growth of 11 per cent for the coming fiscal year, after likely contracting 7.7 per cent in the current fiscal year to March 31, an annual economic survey showed on Friday.
