Indian shares rose on Thursday just ahead of the Narendra Modi-led government's last full federal budget before a general election next year, amid hopes it would stay the course on containing the fiscal deficit.
Bonds were range-bound, with the benchmark 10-year bond yield flat at 7.43 percent. The rupee weakened to 63.6650 from its 63.58 close on Wednesday, tracking a stronger dollar after the U.S. Federal Reserve signalled its confidence about inflation and growth in the world's biggest economy.
Investors in India are keenly waiting to see how much India widens its fiscal deficit for the year starting in April, from the current projection of 3.0 percent of gross domestic product.
A Reuters poll showed most economists expect a 3.2 percent deficit as the government looks to increase investments in key areas such as agriculture to bolster its prospects in upcoming elections.
Finance Minister Arun Jaitley is due to start presenting the budget around 0530 GMT.
"If the budget is committed to fiscal consolidation and there is no additional tax burden on capital market investments then it will be welcomed cheerfully by investors," said Sudhakar Pattabiraman, head of research operations at MarketSmith, which is part of financial services provider William O'Neil.
The broader NSE Nifty was up 0.39 percent at11,070.80 as of 0421 GMT, while the benchmark BSE Sensex was 0.45 percent higher at 36,127.41.
The gains were led by index heavyweight Larsen & Toubro Ltd , which rose as much as 3.6 percent to an all-time high on strong results for the quarter ended December.