Indian shares could edge upwards after strong quarterly earnings growth and on hopes that interest rates will stay steady, dealers said. Sentiment remained buoyant at the end of the week after India's central bank on Tuesday kept leading interest rates on hold while the US Federal Reserve lowered rates the following day.
Monetary authorities will however closely monitor inflation, which jumped to a 42-month high of 7.57 percent for the week ended April 19, up from 7.33 percent the previous week.
In April, the central bank twice hiked the percentage of cash banks must set aside as reserves to suck out liquidity and check inflation. For the week to May 2, the benchmark 30-share Sensex index rose 2.76 percent or 474.14 points to 17,600.12, a two-month closing high. As of Friday's close, the Sensex had fallen by more than 13 percent this year on a combination of overseas fund sales of 2.58 billion dollars and tight liquidity conditions for local investors.
During the same period last year, overseas funds bought 2.93 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. "With the US Fed cut out of the way, the fear of the unknown is gone. Probably it's time for greed to make its presence felt. The Sensex could rally for a short while to 18,250-points level," said Anmol Sekhri, a Bonanza Portfolio fund manager.
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