(Bloomberg) -- The sharpest rally in Indian stocks in more than four months, spurred by Prime Minister Narendra Modi’s budget boost, lasted only for a few hours, as risks around Adani Group companies resurfaced to roil investor sentiment.

The benchmark S&P BSE Sensex Index pared gains to 0.3% at trading close in Mumbai after gaining more than 2% earlier on optimism that the government’s budget measures that included a cut in personal income taxes and ramping up infrastructure spending will spur economic growth. Adani Group’s flagship company Adani Enterprises Ltd. fell as much as 35%, dragging banks and insurers. 

The selloff in Adani Group companies accelerated on Wednesday afternoon, wiping off about $93 billion of its market value in the last week, after Bloomberg reported Credit Suisse Group AG has stopped accepting bonds of the conglomerate’s companies as collateral for margin loans to its private banking clients.

“The Adani group has come under selling pressure, which is hurting sentiment,” said Deepak Jasani, head of retail research at HDFC Securities Ltd. 

Stocks had rallied earlier after Finance Minister Nirmala Sitharaman boosted capital spending by more than a third to 10 trillion rupees ($122 billion) next fiscal year. Still, Prime Minister Narendra Modi’s government is borrowing a record amount to finance spending in the last full-fledged budget before the 2024 elections.

Modi’s government aims to borrow 15.43 trillion rupees from the bond market, Sitharaman said. That’s lower than the 15.8 trillion rupees estimate in a Bloomberg survey, but higher than the 14.2 trillion rupees budgeted for the current fiscal year ending March 31.

The benchmark 10-year yield was down seven basis points at 7.28%, while the 5-year yield fell ten basis points 7.12%.

“The borrowing is slightly lower than what the market was expecting, which has helped bonds, because it means other sources of funding like small savings are being called on,” says Dhiraj Nim, an economist at Australia and New Zealand Banking Group. “We still need to check the credibility of revenue estimates though.”

Lower sales will help ease bond yields, also likely to be capped by other positive factors including a weaker dollar, a less hawkish Federal Reserve and expectations that the Reserve Bank of India is nearing the end of its rate-hike cycle. 

--With assistance from Malavika Kaur Makol and Subhadip Sircar.

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