Indian shares are likely to remain choppy next week, with dealers saying they will be eyeing domestic political developments as the ruling Congress party braces for a confidence vote in parliament. The government, which took office in 2004, was reduced to a minority when its communist allies withdrew support in protest at a nuclear energy deal with the United States.
The vote is expected Tuesday, with analysts saying the result is too close to call. The markets rose for the second straight week, as concerns linked to crude oil and inflation eased marginally. Dealers said political events will determine near-term trends, alongside future monetary policy from India's central bank to combat inflation. The Reserve Bank of India will gather July 29 for its monetary policy meeting.
"The IT sector stocks weakened on fears of a slowing down in the US. If the government survives next week, then the market may move up swiftly in a short span," said Alex Mathew, head of research at Geojit Financial Services. For the week to July 18, the benchmark 30-share Sensex index rose 1.22 percent or 165.55 points to 13,635.4.
On Thursday, it was reported annual inflation in Asia's third-largest economy rose to a lower-than-expected 11.91 percent for the week ended July 5, against 11.89 percent for the previous week. The markets largely ignored first quarter earnings data from Indian software companies Wipro and Satyam Computer.
Bangalore-based Wipro's net profit rose 25 percent at 9.08 billion rupees (212 million dollars) in the three months to June 30, beating forecasts, and up from 7.1 billion rupees a year earlier, it said in a statement to the Mumbai Stock Exchange. Satyam said net profit for the same period rose 44.9 percent to 5.48 billion rupees as a weaker rupee aided margins and revenue growth.
Earlier in the week, India's largest software exporter TCS said net profit was up seven percent to 12.9 billion rupees for the quarter, from 12.03 billion rupees a year earlier, a performance roughly in line with expectations. Dealers expect markets will be choppy in the coming weeks on expectations that India's central bank will raise rates to curb rising inflation.