Indian shares are likely to remain choppy, tracking global markets, with investors hoping the central bank will lower rates further as inflationary pressures ease, dealers said.
Reports that Citigroup is mulling auctioning off all or parts of the US financial giant, and a decision to delay a multi-billion dollar rescue for the crippled auto industry saw the US Dow Jones Index slip to a five-year-lows on Thursday. Locally, the markets are likely to remain volatile ahead of the monthly futures markets expiry next Thursday.
The markets will also keep an eye on the central bank, which is widely expected to lower interest rates in coming days, after inflation fell for the second straight week to 8.9 percent on Thursday.
For the week to November 21, the benchmark 30-share Sensex index fell by 5.01 percent or 470.21 points to 8,915.21, a near-three-year-low. "The strong closing on Friday signals a firm opening next week," said P.K. Agarwal, head of research at financial services firm Bonanza Portfolio.
The benchmark Sensex rose 464.2 points or 5.49 percent on Friday, snapping a seven-day losing streak. However dealers expect the gain to be short-lived and the markets may edge lower again if foreign funds continue to sell Indian equities heavily.
In November, foreign funds have sold equities worth 331.6 million dollars.
As of Friday's close, overseas funds had sold Indian stocks worth 13.25 billion dollars for the year. During the same period last year, overseas funds bought 16.95 billion dollars worth of Indian equities.
Since October, the RBI has reduced the repo - the rate at which the central bank lends to commercial banks - by 150 basis points from 9.0 percent to 7.5 percent. To boost liquidity, the RBI has lowered the cash reserve which banks on deposit by a cumulative 3.5 percentage points from 9.0 per cent to 5.5 percent. The rupee closed Friday against the dollar at 50.01, near record lows, after slipping sharply this week as uncertainty over the global crisis and overseas fund inflows mounted. The Indian currency has been under pressure against the dollar for months, dragged down by sales of Indian assets.
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