Indian shares are expected to rise this week following an investor-friendly budget and quarterly earnings, while the bond market awaits clarification on a proposal to tax purchases routed through exchanges.
The 30-share Bombay Stock Exchange rallied 2.1 percent on Friday to close at 4,945.48 points after a steep fall the day before on fears that the tax proposed in the federal budget disclosed on Thursday may increase transaction costs and hurt overall volume.
The index gained 1.5 percent last week and is expected to rise further this week on expected strong earnings from companies such as Infosys Technologies Ltd, the second largest services exporter, on Tuesday, and Hero Honda Motors, the biggest motorcycle maker, on Wednesday.
Traders expect telecom, power, shipping and textiles to gain as a result of benefits extended to these sectors in the budget.
Finance Minister Palaniappan Chidambaram said on Friday he expected India's economy to grow close to 7 percent in the fiscal year to March 2005.
However, sentiment was dampened after the weather office said on Friday that the monsoon, which is critical to India's farm-dependent economy, has begun a weak phase. The delay of rains could hurt farm output.
The finance minister has met with the central bank and is scheduled to meet stock brokers on Tuesday.
A proposed transaction tax of 0.15 percent is to be imposed on all securities purchases routed through stock exchanges.
But bond traders said the tax was too high for bond transactions, whose spreads between buy and sell prices are 0.5 percent or less.
Yields had risen sharply in reaction to the announcement, despite other bond-positive measures announced in the budget. The benchmark 10-year federal bond yield closed at 5.7898 percent on Saturday.
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