Indian shares rose for a third session in a row on Tuesday, climbing 0.7 percent to their highest close in nearly five weeks, but trading was volatile ahead of a stimulus package in next week's interim budget. Investors were also awaiting a U.S. economic rescue plan expected later on Tuesday, which is expected to set the trend for world markets. Financial stocks led the gains on hopes for rate cuts, which will help bump up the treasury income of banks, although a higher-than-expected extra government borrowing plan drove bond yields higher. 'There are some important announcements due. The budget is keeping the markets hopeful about measures to boost the economy,' said Jigar Shah, senior vice president at Kim Eng Securities. The BSE stock index rose 0.66 percent, or 63.58 points to 9,647.47, with 17 of its components gaining. The benchmark had fallen as much as 0.8 percent at one stage, before rebounding. The Congress party-led federal coalition government is expected to unveil fiscal stimulus steps in its interim budget on Feb. 16 to revive economic growth, which official estimates showed on Monday was expanding at its slowest pace in six years. A full budget for the fiscal year beginning April will come after a new government takes over following general elections due by May. 'The market is looking for some excitement. There are 2-3 policy triggers,' said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries. The federal government will borrow an extra $9.45 billion by late March from the market, an official said on Tuesday, sending bond yields higher and raising concerns about the state of public finances. The extra borrowings are largely aimed at supporting the economy, which has been hurt by a slump in consumer spending in the wake of the global financial crisis. Engineering conglomerate Larsen & Toubro and state-run power equipment maker Bharat Heavy Electricals that could benefit from higher government spending on infrastructure-related projects, were among the key gainers. Larsen rose 3.4 percent to 697.35 rupees, its highest close in three weeks while BHEL added 4.2 percent to 1,451.60 rupees, its best finish in more than a month. Top lender State Bank of India firmed 1.4 percent to 1,164.05 rupees, HDFC Bank raced 3 percent to 946.85 rupees and mortgage lender Housing Development Finance Corp gained 0.9 percent to 1,505.10 rupees. Leading telecom operator Bharti Airtel fell 0.5 percent to 662.80 rupees on foreign fund selling, traders said. Metal stocks also dropped after several days of gains. Tata Steel shed 1.3 percent to 196.95 rupees and Sterlite Industries lost 1.1 percent to 278.10 rupees. Unitech rallied 9.5 percent to 31.85 rupees after the second-largest listed developer said it had rescheduled 75 percent of its debt. Bigger rival DLF Ltd rose 9.1 percent to 152.50 on media reports it had raised 10 billion rupees from banks in the past two weeks. Leading outsourcer Tata Consultancy Services ended up 1.6 percent at 524 rupees, ahead of a tie-up announcement with network equipment maker Cisco Systems Inc to help customers build next-generation data centres for their networks. In the broader market, advances led declines in the ratio of 1.3:1 on heavy volume of 353 million shares. The 50-share NSE index gained 0.5 percent to 2,934.50 points, its highest close in more than a month. MAIN TOP 3 BY VOLUME * Unitech on 34.2 million shares * GVK Power & Infrastructure on 10.9 million shares * IFCI on 10 million shares STOCKS THAT MOVED * Utility vehicle maker Mahindra & Mahindra rose 3.35 percent to 283.50 rupees after a newspaper reported its auto components unit was in advanced talks with two Australian aerospace companies to make small aircrafts. * Rail coach maker BEML Ltd extended gains for a second session, rising 5.8 percent to 392.55 rupees, after it secured a 16.7-billion-rupee order from Bangalore Metro Rail

Source