Indian shares are seen rising further this week ahead of the new fiscal year starting in April, on expectations of robust fourth quarter results as companies gain from the booming economy, analysts said.
However trade is likely to be choppy and gains capped on political concerns ahead of general elections beginning on April 20.
The 30-issue Bombay Stock Exchange Index gained 1.6 percent on the week but is down 11.5 percent from the year's high of 6,249.60 hit in January. It closed at 5,528.94 on Friday.
"April has usually been a building block for gains, but we have the elections this year, and that can cause some uncertainty," said Shankar Char, a senior manager of institutional sales at Cholamandalam Securities.
"But we have crossed the hurdle of initial public offerings fairly comfortably, and we seem to be heading into a clear upward trend," he added. However Char said it was still too early for major gains and forecast the index trading between 5,520 and 5,620 this week.
Investors will also have been encouraged by the recent strong interest by foreign funds in public share offerings, as well as investment by domestic institutions for the new fiscal year.
India, Asia's third largest economy, is expected to grow at a whopping 8.1 percent this fiscal year to March and many firms are seen reporting hefty profits next month, when the reporting season for the fourth quarter begins.
However, Char said there was still room for a correction in the market and he doesn't expect a clear rally until the end of May when there is greater political clarity.
A strong Indian rupee could also cause problems for export-dependent sectors like technology and to a lesser extent pharmaceuticals by making these products more expensive for overseas buyers.
The rupee soared to 44.47 against the dollar last week, a 46-month closing high, on the back of strong foreign fund inflows. The currency has appreciated by more than 2.5 percent this year, and is expected to rise further before the central bank intervenes.
"The rupee's strength is bad news in the long-term as it will impact on their margins," said Ajit Surana, managing director of Dimensional Securities, referring to software services firms, which derive about 70 percent of their revenues from exports.
But oil stocks will continue to gain from firm international crude oil prices and expectations of petrol price hikes after the general elections.
And cement, steel and auto stocks will also gain on strong March sales numbers and robust demand in the economy.
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