Feb 2 (Reuters) - India's equity benchmarks advanced on Monday, led by gains in infrastructure stocks and bargain hunting in heavyweight Reliance Industries, as markets partially recovered from damage taken after the federal budget.

The Nifty 50 rose 1.06% to 25,088.4, while the BSE Sensex added 1.17% to 81,666.46. Intraday, the indexes swung between gains of 1.3% and losses of 0.6%.

The benchmark indexes fell about 2% on Sunday, marking their biggest budget-day percentage drop in six years, settling at the lowest levels seen since November.

"We see limited downside risk (for Nifty) after a 2% drop on Sunday," said analysts led by Seshadri Sen of Emkay Global Financial Services.

The budget continued to prioritise infrastructure and manufacturing while maintaining fiscal discipline, making Sunday's reaction a knee-jerk response, according to three analysts.

Sunday's sell-off was triggered by the proposal to hike the securities transaction tax on derivatives, higher-than-expected gross borrowing for fiscal year 2027 and the absence of cuts in capital gains tax or measures to attract foreign inflows.

"The impact on large institutional hedging strategies due to STT hike is likely to be limited," said Anand Gupta, lead portfolio manager of Indian equities at Allianz Global Investors.

"Historically, marginal increases in STT have not had a material impact on market participation, liquidity or hedging activity," he said.

Fourteen of the 16 major sectors logged gains on the day. The broader small-caps and mid-caps rose 0.6% and 1%, respectively.

Oil-to-telecom conglomerate Reliance Industries jumped 3.2% making it the biggest contributor to benchmark gains. The move marked a recovery from a 3.5% drop on budget day.

Traders piled into infrastructure major Larsen & Toubro's shares, which rose 2.8%, boosted by the budget's focus on capital expenditure.

Shriram Finance declined 3.2%, emerging as biggest loser on the Nifty 50 index on concerns that higher borrowing by the government would raise its funding costs.

(Reporting by Vivek Kumar M and Bharath Rajeswaran; Editing by Eileen Soreng, Harikrishnan Nair, Sonia Cheema and Ronojoy Mazumdar)

By Bharath Rajeswaran and Vivek Kumar M