INDIA STOCKS-State-owned firms lead India's benchmark indexes higher

Updates for markets close

By Bharath Rajeswaran and Vivek Kumar M

Jan 30 (Reuters) - India's benchmark indexes advanced on Thursday, as state-owned companies gained on expectations of a government spending boost in the upcoming union budget, overshadowing a drop in IT stocks and Tata Motors.

The Nifty 50 .NSEI settled 0.37% higher at 23,249.5, while the BSE Sensex .BSESN added 0.3% to 76,759.81, marking their third straight session of gains.

However, the Nifty is down 11.5% from the record-high level hit on Sept. 27, hurt by a moderation in economic and corporate earnings growth.

The three-session rally in the benchmarks is aided by "attractive valuations" in large-cap stocks after the recent correction, offering a good margin of safety from a long-term perspective, said Gaurav Bhandari, chief executive officer at Monarch Networth Capital.

Nine of the 13 major sectors advanced on the day.

State-owned companies .NIFTYPSE gained about 2%, with analysts attributing the rise to expectations of government focus on public spending and infrastructure in the budget announcement on Saturday.

The second heaviest stock on the benchmark indexes, Reliance Industries RELI.NS rose 1.4%.

The broader, more domestically focussed small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 closed flat on the day.

They have lost 12% and 8%, respectively, in January so far, underperforming the 1.7% drop in the Nifty 50.

"While the large-caps offer some safety to investors, elevated valuations and earnings concerns in small and mid-caps could trigger further selling pressure," said Nitin Bhasin, head of institutional equities at Ambit Capital.

IT index .NIFTYIT shed 1.1% after tracking a global tech rally in the previous session to gain 2.6%.

Among individual stocks, Tata Motors TAMO.NS dropped 7.4% after reporting a smaller quarterly profit, weighed down by weak car sales.

Adani Enterprises ADEL.NS fell about 3% after reporting its biggest quarterly profit slump in three years on weakness in its coal trading division.

Non-bank lender Bajaj Finance BJFN.NS rose 2.1% after posting a bigger quarterly profit due to strong loan growth.