Indian shares may be range-bound as global economic concerns and the political fallout over Delhi's nuclear deal with the US could impact near-term sentiment, dealers said. On Thursday, India's inflation decelerated for the second straight week to 12.34 percent for the week to August 23, from 12.4 percent a week earlier.
This level is however considerably higher than the central bank's end-of-year target of seven percent. The markets will await the outcome of a crucial meeting in Vienna where nuclear supplier nations are deciding whether to lift a 34-year-old embargo on trade with India.
This week India's main Hindu nationalist opposition demanded Prime Minister Manmohan Singh quit, accusing him of misleading parliament over a key nuclear pact with the United States.
The deal, which seeks to allow India to buy nuclear technology and reactors after a gap of three decades, has sparked many stormy debates since it was clinched in 2006. "We expect the weak outlook to continue," said Alex Mathew, head of research with brokerage Geojit Financial Services.
For the week to September 5, the benchmark 30-share Sensex index fell 0.55 percent or 80.7 points, to 14,483.83 "A re-acceleration in India's inflation cannot be ruled out, as it will be a challenge to maintain the downward trend in the three-months quarter ending November because of the low year-ago basis of the price index," said Sherman Chan, economist with Moody's subsidiary Economy.com.
As of Friday's close, overseas funds had sold Indian stocks worth 6.94 billion dollars. During the same period last year, overseas funds bought 8.73 billion dollars' worth of Indian equities.