Mumbai, Oct 15: Indian shares are expected to open higher this week, drawing strength from Nasdaq's gains on Friday, but analysts feel the longer-term outlook will remain clouded by the country's slowing economy. The benchmark 30-share BSE Sensex, which lost 8.6 per cent last week to close at a near 17-month low of 3738.93 on Friday, is seen opening with a big upward gap.The Nasdaq composite index gained 7.87 per cent on Friday, helped by an upbeat earnings announcement from web firm Juniper Networks and bullish comments from Goldman Sachs' Chief strategist Abby Cohen.
Middle East tensions appear to be easing after last week'sflare-up and oil prices have dipped from ten-year highs, but analysts are unsure how long this respite will last.
Global oil prices are closely watched as crude and petroleum products account for nearly 75 per cent of India's import bill. "The short-term outlook for the Indian market looks fine thanks to the Nasdaq, but there is no good macro news to ensure a sustained rally," said UR Bhat, chief investment officer of Jardine Fleming India Asset Management Company.
Analysts were faced with a barrage of negative news on the economy last week and poor earning numbers by the key index-linked companies in the cement and consumer goods sectors. India's industrial output growth slowed to 5.3 per cent year-on-year in April-August 2000 from 6.2 per cent a year ago, adding to fears the previous year's cyclical recovery was fading.
At current levels, the index is off 25 per cent in calendar 2000 and 39 per cent down from its mid-February peak of 6150.69 points. It is seen in a 3800-4100 range on light activity ahead of Diwali.
Traders are also happy about the market regulator's Friday decision to postpone the introduction of A group shares into rolling settlements. A Securities and Exchange Board of India (Sebi) official said that the regulator would analyse the results of a trial with carry forward in 15 B1 stocks in the present rolling list before taking a decision on the A group shares, which are the most actively traded stocks.
Trades in A group shares can be carried forward whereas in the rolling settlement, transactions have to be settled on the fifth day after the day of trade.
Experience shows that volumes fall sharply after shares move into this settlement.
Foreign funds have sold a net $ 54.6 million so far in October and traders do not expect the market to move up much till they step up purchases. Bhat felt the funds were unlikely to look at India positively in the near term.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.