Indian markets eked out a gain in volatile trade on Friday, but fund managers remained wary of its direction as they waited for the incoming Congress-led government to outline its economic policies and name a new cabinet.
The benchmark Mumbai share index ended 0.6 percent higher at 4,962 in thin trade, after swinging in a 174-point range, as investors sought safety in software and consumer goods. Despite Monday's 11 percent crash, the index ended the week just 2.1 percent lower.
Manmohan Singh, a 71-year-old ex-finance minister who kicked off India's economic reforms 13 years ago, is set to be sworn in as prime minister of the world's largest democracy on Saturday. He has not yet indicated who will be in his cabinet.
"In the near term, you're going to see volatility as the government struggles to strike a balance between expectations and the realities of holding together a disparate coalition," said Abhijit Raha of fund group Cornerstone Asia Investments Pte Ltd.
Investors are keen to see the "common minimum programme" (CMP), a statement on policies acceptable to all members of a coalition of leftists, centrists and regional parties. Political sources said the CMP was in the final stages of preparation.
"We cannot read too much into today's moves. Volumes are low as most people are staying away and waiting for the CMP and the name of the finance minister," said Jayesh Shroff, fund manager at BOB Mutual Fund. "That will give a clear indication of policy direction. Hopefully, all this will be cleared up by Monday."
Volumes fell to 93 million shares on the Mumbai exchange from a daily average of some 120 million in the past four sessions.
India's markets have been whipped around in the past month on fears of a slowdown in foreign fund inflows, ever since it became clear the previous pro-reform government might struggle to stay in power. The three-week-long national election ended last week.
Foreign funds have sold a net $720 million of Indian shares over 13 straight sessions to Thursday, well over a sixth of what they had invested this year before political worries set in. The funds have not been net buyers of Indian shares since May 3.
The Mumbai share index is down around 16 percent in the past month, while the rupee, which hit a four-year high against the dollar in April, has wiped out this year's gains.
Ten-year bond yields, which move inversely to prices, are up 10 basis points.