Indian shares and bonds could be choppy this week and may stay volatile at least until early next month when the new government releases its maiden budget, indicating how willing it will be to extend economic reforms.
The 30-issue Bombay Stock Exchange index gained 1.47 percent on Friday after volatile trade last week, when the new Finance Minister P. Chidambaram's visited the city for the first time after taking office on May 23.
The Congress-led United Progressive Alliance, backed by leftist parties, released a common minimum programme (CMP), the bedrock of its economic agenda, soon after coming to power two weeks ago.
The CMP outlined the government's target of seven to eight percent annual economic growth, a promise of fiscal prudence and encouragement of investments, while reaching out to the farm sector and the poor.
"Clearly Finance Minister Chidambaram is pro-reforms. His visit to Bombay and his comments here show that the government appreciates the importance of capital markets. But I would still wait for the budget and for action on the ground," Jain said.
While in Bombay, Chidambaram said six new power projects had been identified and another 10 were in the planning stages, together set to produce 10,700 megawatts.
Bonds were expected to stay within a tight range this week as traders wait for the budget and amid growing signs that global interest rates will rise, following last week's robust US jobs data.
Still, the belief that the Indian central bank will not rush to raise rates, despite a growing economy, will help bonds.
"While the market looks at developments in the global market, what happens in the local market will have larger implications," said U. Venkataraman, head of trading at IDBI Bank.
The key 10-year federal bond yield closed at 5.2287 percent compared with 5.2528 percent a week earlier.
Venkataraman saw the yield within the 5.20 to 5.30 percent band during this week.
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