Indian shares are expected to slip further amid concerns of rising inflation and oil prices, dealers said. They said investor sentiment remains weak on concerns that India's central bank may hike rates or increase the portion of cash commercial banks must keep on deposit to curb inflation ahead of its scheduled July policy meeting.
Earlier this week, the government hiked petrol prices by 11 percent and diesel prices by 9.4 percent to reduce mounting losses for state-run oil firms, which sell fuel at below cost to help poor consumers. India imports 70 percent of the oil needed for its fast-growing economy.
On Friday, data showed inflation jumped to 8.24 percent for the week ended May 24 from 8.10 percent the previous week, piling more pressure on the government to curb prices as general elections loom within a year.
For the week to June 6, the benchmark 30-share Sensex index fell 5.13 percent or 843.39 points to 1,572.18. "The market is nervous, expecting action from the RBI through a possible repo rate hike. We advise investors to reduce their stock positions and stay on the sidelines," said Alex Mathew, head of research with brokerage Geojit Financial Services.
India's inflation has risen steadily despite aggressive tightening by the central bank. As of Friday's close, overseas funds had sold Indian stock worth 4.62 billion dollars. During the same period last year, overseas funds bought 4.17 billion dollars' worth of Indian equities.
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