Nifty edges lower in volatile trade after budget

By Abhishek Vishnoi and Indulal PM

MUMBAI (Reuters) - The Sensex and Nifty edged lower in a volatile session on Thursday as Finance Minister Arun Jaitley's pledge to narrow the fiscal deficit and open up sectors such as insurance and defence were offset by disappointment over the lack of major reforms.

Investors also booked profits, with some citing the lack of details on how the government would keep its promise to stick to the fiscal deficit target of 4.1 percent of gross domestic product for this fiscal year set by the previous government.

Both Moody's Investors Service and Fitch Ratings said details would be key, with Fitch expressing surprise that the government had decided to keep its 4.1 percent fiscal deficit target.

 

"Plan to reduce the fiscal deficit gradually to 3 percent is good for economic health," said Atul Kumar, head of equity funds at Quantum AMC, although he added that the budget would also "disappoint those looking for big-bang reforms from the new government."

The 50-share Nifty ended 0.23 percent lower at 7,567.75. It had earlier fallen as much as 1.4 percent to its lowest in nearly 2-1/2 weeks in an initial bout of profit-taking.

The Sensex closed 0.28 percent lower at 25,372.75.

Blue-chips were hit by profit-taking after indexes had hit a string of record highs, including most recently on Tuesday, on soaring expectations ahead of the budget.

Mahindra and Mahindra Ltd fell 1.1 percent, although it has gained 23.4 percent so far this year. Hero MotoCorp ended 3.9 percent lower, though it's still up 17.5 percent.

Interest-rate sensitive shares fell even as a narrower fiscal deficit would help contain inflation. State Bank of India fell 1.4 percent while ICICI Bank lost 1 percent.

Software stocks fell ahead of Infosys kicking off the April-June results season on Friday. Infosys fell 0.53 percent while Tata Consultancy Services lost 1.9 percent.

But among gainers, some financial firms rose after Jaitley said the government would seek to raise the foreign investment limit in the insurance sector to 49 percent from 26 percent. Max India Ltd gained 0.83 percent.

IDFC gained 8.7 percent on government measures to boost infrastructure lending.

Meanwhile, real estate developers surged on Jaitley's plan to provide incentives for the establishment of real estate investment trusts.

DLF Ltd surged 9 percent, Prestige Estates Projects rose 6.3 percent, Indiabulls Real Estate advanced 5.03 percent, and Housing Development and Infrastructure Ltd gained 5.4 percent.

Road developers also gained after the finance minister proposed a 378.5 billion rupee ($6.32 billion) investment in National Highways Authority of India and state roads in the current fiscal year, traders said.

GMR Infrastructure Ltd gained 0.71 percent, IRB Infrastructure Developers Ltd rose 4.2 percent and Ashoka Buildcon rose 0.8 percent higher.

(Editing by Subhranshu Sahu)