India shares at two-week high

Indian shares closed at a two-week high on Wednesday, taking heart from the government's plan to boost spending to pull the economy out of a pandemic-induced slump.

Led by financial and technology stocks, the blue-chip NSE Nifty 50 index (.NSEI) closed 1.16 per cent higher at 17,780 and the S&P BSE Sensex (.BSESN) advanced 1.18 per cent to 59,558.33.

Both the indexes climbed nearly 1.5 per cent on Tuesday after the federal budget showed the government would increase spending to 39.45 trillion rupees ($527.75 billion) in the coming fiscal year to build public infrastructure and drive economic growth.

"The capex-driven budget will drive credit growth in the economy, so we may see benefits for the banking sector, which was a laggard," said Anita Gandhi, director at Arihant Capital Markets.

She also said there was some comfort around the sector's valuation and asset quality.

After recovering from a recent selloff driven by worries around US interest rates and inflation, the domestic indexes are now just 4 per cent off the record highs they hit in October.

But rising bond yields could affect that positive momentum, Gandhi said.

The benchmark 10-year bond yield spiked to 6.8805 per cent on Wednesday, after surging in the previous session on worries over the budget's impact on borrowing figures and the fiscal deficit.

The Nifty Bank index (.NSEBANK) and the Nifty PSU Bank index (.NIFTYPSU) led gains among sub-indexes, rising 2.1 per cent and 3.4 per cent, respectively.