India's stock market indices will eye the central bank moves on interest rates and second-quarter earnings from Indian companies, dealers said. The Reserve Bank of India (RBI) is not expected to hike rates at its monetary policy review next Tuesday, even as India's inflation rate continues to edge up.
Inflation rose 0.29 of a percentage point to 1.21 percent for the week ended October 10 from 0.92 percent in the previous week, according to the Wholesale Price Index, India's most-watched cost-of-living benchmark.
The RBI will weigh up economic data, amid recent comments by the government that a nascent economic recovery should take root before interest rates are hiked.
RBI governor Duvvuri Subbarao has said India may however need to hike rates before developed economies, with inflation set to hit 6.0 percent by March 2010, according to the finance ministry.
During the week to October 23, the 30-share Sensex index fell 2.95 percent, or 512.01 points, to 16,810.81 points. "Quarterly earnings will be eyed for near-term trading trends," said a dealer at local brokerage Sharekhan.
Next week some of India's large companies like software giant Wipro, top vehicle maker Tata Motors and the world's eighth largest steel maker Tata Steel report earnings.
Investors will also eye developments linked to a gas dispute between the warring billionaire Ambani brothers next week, as the Supreme Court of India continues with its hearing in the case. The Ambani brothers are at loggerheads over the pricing of gas in a 2005 agreement struck when they carved up the Reliance empire after the death of their father Dhirubhai Ambani.
Indian firms are expected to report a fall in profits in the quarterly results season, but better times lie ahead as the country's economic recovery takes hold, analysts forecast. Indian shares have been on the rise since March, buoyed by domestic and international economic data pointing to signs of a recovery.
Foreign funds have bought equities worth 14.08 billion dollars so far this year after selling shares worth 11.08 billion dollars during the same period last year.