Indian shares are likely to fall further next week with investors reluctant to build up positions due to worries about global rate hikes and a US capital goods sector slowdown, dealers said. The markets were sharply volatile this week with no clear trend emerging as the benchmark 30-share Sensex fell below the 12,500-point level before recovering marginally.
The index closed Friday at 12,884.99, flat against the previous week's level of 12,886.13. The week saw sharp bouts of buying and selling, in which shares notched up one of their biggest ever one-day gains on Thursday but failed to sustain the trend the following day.
The markets have now shed 12.4 percent from an intraday high of 14,723.8 hit on February 9 on concerns about a US slowdown and stretched valuations in emerging markets such as India.
Inflation edged higher to 6.10 percent for the week ended February 24, as food prices gained, though they remained below a recent two-year peak of 6.73 percent.
The Sensex has slipped nearly seven percent below its last year's close of 13,786.91, despite expectation of strong earnings to be reported next month for the quarter ending March 31.
Foreign funds have invested 1.18 billion dollars this year in Indian equities, way below the 3.2 billion dollars pumped into the market during the same period last year.
Overseas funds were net sellers of Indian equities to the tune of 550 million dollars in the first week of March this year. "There's no trend emerging due to sharp volatility, with stocks being offloaded each time the markets recover. We expect the markets to consolidate at these levels," said Advait Date, dealer at brokerage BHH Securities.
In 2006, the Sensex rose by a record 46.7 percent, led by foreign fund investments in Indian equities totalling 7.99 billion dollars. In 2005, the index climbed by 42.3 percent on record overseas fund flows of 10.7 billion dollars.