A series of global events like the US Federal Reserve meeting, the Group of Seven finance ministers' meeting and Iraq elections will dictate movement of Indian shares, brokers said on Friday. On Friday, the benchmark Bombay Stock Exchange's 30-share Sensex closed at 6,419.09, up 235.85 points from the previous week's close.
Dealers said this week's bullish trend may be capped by international developments, especially the US Federal Reserve meeting on February 2 and 3.
"Foreign investors are eyeing the Fed meeting with a possible 25 to 50 basis point rate hike anticipated," said Prakash Lala, managing director at Centaur Capital Markets.
He said a rate hike could trigger a near term flight of funds from emerging markets such as India to the US markets.
Lala said changes likely in the global currency markets on the eve of the February 4-5 meeting of the Group of Seven finance ministers could also keep sentiment cautious in global equity markets.
Dealers said chances of a rate hike in India were less as there was enough liquidity in the market, although banks were seen raising short term deposit rates.
"Inflation is still below six percent which will curb any possibility of near term rise in interest rates," a fund manager with a mutual fund said.
He said Friday's sharp gain of 179.66 points was likely to be followed by profit taking next week. The Sensex posted on Friday its highest one-day gain since January 23, 2004. Dealers said speculators and funds bought across sectors on improved sentiment after a series of blue chip companies posted impressive results and on the smooth rollover of open futures contracts to February on Thursday.
They said investors were also seen buying up blue chips ahead of the federal budget due at the end of February.
The index gained by more than 13 percent in 2004 on the back of heft foreign investor investments.