Markets rose for a second straight day on Monday, driven by the automobile sector, although the gains were capped by a sharp sell-off in metal stocks after the government announced changes to the tax structure on commodities to fight inflation.
The Nifty was up 0.44% around 16,340 in early trade, while Sensex rose 0.53% to around 54,615. Both the indices closed nearly 3% higher on Friday to mark their first weekly gain in six.
Nifty Metal plunged nearly 9%, its lowest since December, with JSW Steel, Tata Steel falling over 11% each. Nifty Auto climbed as much as 2.9%.
"Metal stocks are seeing selling pressure on news related to export duty on iron ore and waiver of import duty on steel as it could impact their margins," said Ajit Mishra, vice president, research at Religare Broking.
"But this would result in lower cost of raw materials for the automobile sector," Mishra said.
The Indian government said on Saturday, effective 22 May, it would remove the import duty on anthracite, PCI coal and coking coal.
"The government's aggressive move on inflation by cutting the excise duties on petrol and diesel and other initiatives to soften the prices of steel will slightly reduce the RBI's burden on controlling inflation," said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
Although this is a positive from the market's perspective, the government's additional borrowing and fiscal deficit shooting beyond the budget estimates are areas of concern, Vijayakumar added.
Maruti Suzuki India, Mahindra and Mahindra were the top gainers on the Nifty in early trade, rising 4.2% and nearly 3%, respectively.
Food delivery firm Zomato rose 2% ahead of its quarterly results.
Broader Asian stocks fell on worries of the impact of rising interest rates on global economic growth.
