Indian shares are expected to be volatile next week amid concerns about rising inflation and oil prices, dealers said. They said investor sentiment was weak on reports of a possible fuel cost hike, led by higher global crude oil prices.
India's petroleum ministry on Friday said a domestic fuel price increase was "inevitable" to bail out state oil firms that sell fuel at hugely discounted rates and are reeling from surging global prices.
India imports 70 percent of its oil requirements. Revised inflation data showed a jump to eight percent in March for the first time in three-and-a-half years. For the week to May 23, the benchmark 30-share Sensex index fell 0.52 percent or 87.43 points to 16,649.64.
"As crude prices are inching up, the government signalled a price hike for petroleum products. Such a price hike will have a negative impact on the markets, particularly automobile stocks," said Alex Mathew, head of research of Geojit Financial Services. India's inflation has risen steadily despite aggressive tightening by the central bank. As of Friday's close, overseas funds have sold Indian stock worth 2.87 billion dollars. During the same period last year, overseas funds bought 3.61 billion dollars' worth of Indian equities.
In 2007, India's stock market rose 47.1 percent, the largest climb in four years, driven by record foreign investment of 17.23 billion dollars.
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