Indian shares are seen slipping this week, after a short rally on robust quarterly earnings, as investors await results of the ongoing general election.
While corporates such as index heavyweights Reliance Industries Ltd and consumer goods maker Hindustan Lever Ltd are due to report earnings this week, analysts say the outlook is clouded by worries over the election outcome.
The 30-share Bombay Stock Exchange index closed at 5,925.58 points on Friday, ending the week 1.09 percent higher.
"The political outlook is holding back the market and a lot of positions were liquidated on Friday afternoon as nobody wants to go in to the week with a big overhang," said C.K. Narayan, a technical analyst at ICICI Securities. The Bombay exchange and the National exchange will be closed on Monday as the critical third phase of the three-week long general election moves into the key state of Uttar Pradesh.
A convincing win for the Bharatiya Janata Party-led coalition is seen as vital to aggressively pushing through economic reforms. But a new poll on Friday predicted the coalition would get a slimmer majority than expected.
The Indian Express-NDTV poll said the coalition would win anywhere between 255 and 275 seats, which is fewer than the 306 it won in 1999, but still higher than the 273 seats it requires to return to power in the lower house of parliament.
Foreign funds have bought $895 million worth of Indian shares in April so far, and analysts expect greater interest from them after top US pension fund, Calpers, added India to the list of emerging markets it would invest in.
Cement, steel and auto makers have rallied and may rise further this week on strong earnings. India's core infrastructure sector grew 7.1 percent in March from a year earlier, according to data from the Commerce and Industry Ministry last week.
However, sentiment in technology stocks is likely to remain weak, after a conservative outlook for the year from a leading software firm last week due to the strong Indian rupee.