Indian shares edged higher on Wednesday as auto makers advanced on hopes for lower costs for vehicle loans after the central bank cut interest rates, but doubts about future monetary easing led to profit-taking in recent out-performers.
Indian markets face a number of challenges ahead, including worries that high oil prices and big borrowing plans from the government could prevent inflation from falling too much at a time when growth is slowing.
That could prevent continued gains in India's main indexes, after the main BSE index edged up enough on Wednesday to book its highest close since April 4. India's main 30-share BSE index pared earlier gains to end up just 0.2 percent at 17,392.39 points, while the broader 50-share NSE index rose 0.19 percent at 5,300 points.
"We don't know when the next interest rate cut is going to happen," said Sandeep J Shah, CEO of Sampriti Capital, adding that markets would now focus on earnings results, among other factors. Car sales in India rose just 2.2 percent in the fiscal year that ended in March, marking a three year low.
Tata Motors rose 2.7 percent, after earlier hitting a record high of 311.25 rupees.
Shares were also helped after brokerage Sharekhan said the auto maker's $490 million zero coupon convertible bonds were "in the money" for investors, saving Tata potentially costly redemption payments.
Bajaj Auto ended 2.6 percent up, while Mahindra and Mahindra rose 1.14 percent.
Also among gainers, HDFC Bank added 1.4 percent after it posted a better-than-expected 30.3 percent profit surge in its latest quarter, and after predicting stronger credit growth and lower provisioning for loan losses.
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