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Brokers trade at their computer terminals at a stock brokerage firm in Mumbai, India, February 17, 2016.
BENGALURU: Indian shares rose on Thursday lead by gains in state-run companies as investors moved past shock election results that reduced the ruling party's margin of majority and waited for a new government to be formed under Prime Minister Narendra Modi's leadership.
The NSE Nifty 50 index was up 0.93% at 22,831, as of 10:31 a.m IST, and the S&P BSE Sensex rose 0.95% to 75,088.
Modi's National Democratic Alliance (NDA) on Wednesday formally named him as the leader of a new coalition government, a day after it regained power with a surprisingly slim majority.
The benchmarks had closed over 3% higher on Wednesday, after tumbling nearly 6% on Tuesday.
Eleven out 13 major indexes were trading in the green on the day.
"The risk (in markets) is over. While it's not the best outcome, it is also not the worst for the market," said Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management, adding that he expects capex spending to continue.
State-run companies jumped 5.3%, state-run banks surged 4.4% to be among top sectoral gainers.
Both the indexes lost nearly 16% and 15% on Tuesday, on the election outcome.
The Nifty Volatility Index, a gauge for domestic market volatility, further eased to 16.66, lowest since May 8.
The fall in volatility index is indicating that most of the risks are over, analysts said.
Power and industrial equipments maker Bharat Heavy Electricals jumped an exchange-allowed high of 13% on orders for supply of equipment including one from Adani Power and as markets bet that capex spending of incoming government will continue.
More domestically-focussed small-cap and mid-cap added 3.5% and 2.5%, respectively. They had fallen about 8% each on Tuesday. (Reporting by Dimpal Gulwani in Bengaluru; Editing by Savio D'Souza and Nivedita Bhattacharjee)