Indian shares' recovery extends to second day with new government awaited

People walk past the Bombay Stock Exchange (BSE) building in Mumbai

By Dimpal Gulwani

BENGALURU (Reuters) -Indian shares ended higher for the second straight day on Thursday as investors moved past shock election results and awaited the formation of a coalition government.

The NSE Nifty 50 index ended 0.89% higher at 22,821.40 points and the S&P BSE Sensex rose 0.93% to 75,074.51, adding to their gains of more than 3% on Wednesday.

The more domestically focussed mid-cap and small-cap indexes added 2.24% and 3.29%, respectively.

The Bharatiya Janata Party-led National Democratic Alliance (NDA) named Prime Minister Narendra Modi as the leader of a new coalition government, after it regained power with a surprisingly slim majority.

"Some clarity has come with the formation of a coalition government but further concerns would be about allotment of portfolios and the new agenda of the government," said Anita Gandhi, founder and head of institution at Arihant Capital Markets.

The market tanked on Tuesday after the NDA's narrow victory. Despite the gains over the next two days, the blue-chip indexes are still roughly 2% lower than their close on Monday, when stocks jumped as exit polls predicted a handsome victory margin for the business-friendly Modi.

Foreign investors have sold stocks worth more than $2 billion over the last two trading sessions.

Volatility, eased to 16.80, the lowest since May 8, which, analysts said, indicated most risks are over.

Ten of the 13 major indexes rose, led by a 4.69% jump in realty stocks.

State-run companies jumped 3.68%, state-run banks advanced 2.92% on expectations that the new government will continue its capex spending.

Brokerage CLSA expects the government's 100-day plan to include large orders across infrastructure and defence.

Among stocks, Bharat Heavy Electricals ended 8.85% higher after winning some orders.

ITC closed 1.2% higher after its shareholders approved a plan to split its hotel business.

Investors will focus on India's monetary policy decision and the U.S. non-farm payrolls report on Friday.

(Reporting by Dimpal Gulwani in Bengaluru; Editing by Savio D'Souza and Nivedita Bhattacharjee)