Indian markets are likely to edge up next week on hopes of a fresh economic stimulus package to boost growth and further rate cuts from India's central bank as inflation fell to a nine-month low.
India plans a second economic stimulus package to fight flagging growth, government officials have said, but concerns remain for Asia's third-largest economy.
This is expected to bring a fresh momentum, even while trading volumes could remain thin next week due to the holiday season. Earlier this month, authorities announced four billion dollars in extra spending and interest rate cuts to try to shield India from the global financial crisis and the fallout from last month's deadly attacks on Mumbai that have further shaken economic confidence.
India's inflation fell to a nine-month low on Friday of 6.61 percent, according to the Wholesale Price Index, the most watched cost-of-living gauge.
"Lower inflation was a positive but the markets were subdued on clues from global markets," said Alex Mathew, head of research at Geojit Financial.
For the week to December 26, the benchmark 30-share Sensex index fell 7.63 percent or 770.99 points to 9,328.92. Since October, the Reserve Bank of India has reduced the repo - the rate at which the central bank lends to commercial banks - by 250 basis points from nine percent to 6.5 percent.
As of Friday's close, overseas funds had sold Indian stocks worth 13.09 billion dollars for the year. During the same period last year, overseas funds bought 16.11 billion dollars worth of Indian equities.