Indian shares are expected to rise this week as investors bet on strong quarterly earnings when the reporting season turns busy, but uncertainty over monsoon rains could dampen sentiment, brokers said.
A statement by Finance Minister Palaniappan Chidambaram on Monday on a proposed transaction tax of 0.15 percent on purchases of securities routed through exchanges could lift the mood in the share and the bond markets, they said.
Chidambaram said on Saturday that he would address investor concerns about the tax proposal, amid growing worries that it was too high for day traders in equities and bond market players who trade on spreads that are as low as 0.05 percent.
Steel stocks were in focus last week on hopes that global demand would revive and help commodity prices.
"We expect strong earnings from steel and other commodity companies," said Vikram Kenia, a director with Vikram Kenia Securities.
"There are some signs that the global commodity cycle is turning up and that is also helping metal stocks," said Vibhav Kapoor, group strategist with local financial institution IL&FS.
But traders are worried about the impact poor rains will have on the farm-dependent Indian economy.
The rains have been scanty in some key growing regions this season, leading to worries about the country's farm output.
About 600 million of India's billion-plus population depend on the farm sector, which accounts for about 22 percent of India's gross domestic product and is a crucial driver of demand in other sectors, such as manufacturing and services.
Federal bonds, which rallied on Saturday on the back of tame US consumer inflation data, are expected to trade around current levels, with most traders keenly eyeing the government's statement on the transaction tax and Fed Reserve chairman Alan Greenspan's semi-annual testimony starting Tuesday.
The yield on the benchmark 10-year bond, eased 13 basis points to 5.8194 percent on Saturday. It was up nearly 2 basis points on a week earlier but off a high of 5.9857 percent struck on Friday morning.
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