Indian share prices are set to move upwards towards record highs as interest rate concerns eased after India's inflation fell for a third week in a row, dealers said. They said the markets saw fresh buying momentum mid-week on local fund buying as global market sentiment improved after the US Federal Reserve kept key interest rates unchanged at 5.25 percent.
Sentiment was also boosted as India's inflation slipped for the third straight week to 5.44 percent for the week ended May 5, though it was still above the central bank's tolerance level of 5.0 percent.
Dealers said the benchmark 30-share Sensex crossed the 14,000 points level after Indian companies reported higher-than-expected profits for the quarter ended March.
"The markets seem to be closing in on record highs, though valuations appear to be stretched," said a dealer at brokerage Jamnadas Morarjee. Indian shares rose 2.65 percent with the benchmark 30-share Sensex index closing at 14,303.41, up 369.54 points from the previous week's close of 13,934.27.
The Sensex is now just 2.8 percent below the intraday record high of 14,723.8 reached on February 9. The stock market has gained strongly since India's central bank left key interest rates unchanged on April 24, while lowering the economic growth forecast to 8.5 percent for the fiscal year started April 1 from 9.2 percent last year.
Overseas funds have been net buyers of Indian equities so far this year to the tune of 3.09 billion dollars. But that is still below the 4.33 billion dollars worth of shares that they purchased during the same period a year ago.
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 42.3 percent on record overseas fund flows of 10.7 billion dollars.