Indian share prices could post marginal gains next week on hopes that the US Federal Reserve will lower interest rates at its next meeting and spur more fund flows to emerging markets, analysts said. But they said trading would be volatile and there could be profit taking as the market moves towards record highs.
For the week to November 30, the Mumbai stock exchange's benchmark 30-share Sensex index rose 2.7 percent or 510.32 points to close at 19,363.19. "The markets are moving up on expectations of a rate cut from the US Fed. There is, however, no back-up trigger which could sustain buying over the medium term," said Advait Date, a dealer at BHH Securities.
The US Federal Reserve is set to meet on December 11 to decide on monetary policy. Analysts expect the central bank to cut rates by a quarter point from the current level of 4.50 percent amid fears of a slowing US economy.
At Friday's level, India's stock markets have risen 40.44 percent this year. Overseas funds have sold Indian equities worth 1.45 billion dollars in November, but remain net buyers for the year at 15.85 billion dollars. Global bank J. P Morgan Securities said Indian equities could remain range-bound in the short-term.
"We believe the news flow momentum is less likely to be supportive of any significant upside from here over the short-term," Bharat Iyer, equity strategist at J. P Morgan, said in a note to clients.
"We do not believe in the US and emerging markets economic and financial market de-coupling argument. It's a well known fact that the USA continues to be a significant part of the global economy," the report said. A moderation, in US growth - as forecast by the US Federal Reserve last week - and higher risk aversion remain key risks for India's market performance over the next few months, dealers say.