Indian shares are likely to edge higher on Wednesday, mirroring firm Asian cues as investors remain optimistic that the U.S. Federal Reserve will announce further stimulus measures to stimulate the sluggish economy when it concludes its 2-day policy meeting later today.
In recent Congressional testimony, Fed Chairman Ben Bernanke said the central bank remains prepared to take action if financial stresses escalate but made no explicit reference to further easing measures. Many analysts expect the Fed to extend a program called "Operation Twist," which involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower.
Closer home, RBI governor Duvvuri Subbarao defended the central bank's status quo policy, saying that inflation is still high and above tolerance level. Though wholesale price-based inflation and core inflation have moderated, both are still above acceptable levels and worryingly the moderation in WPI has not been transmitted to consumer price inflation, he said while addressing the business community in an event.
Indian shares rose sharply on Tuesday, as bargain hunters stepped in following the previous session's steep sell-off on disappointment over RBI's monetary policy stance. Benchmark indexes Sensex and the Nifty rose about 0.9 percent and 0.8 percent on expectations of a revival in economic reforms.
Provisional data released by BSE showed that foreign institutional investors turned net sellers in Indian equities and offloaded shares worth Rs.93.30 crore yesterday, while domestic financial institutions sold shares to the extent of Rs.278.70 crore.
On Wall Street, stocks posted solid gains overnight on continued speculation about the likelihood of further stimulus from the Federal Reserve. Some encouraging U.S. data concerning permits to build new homes and news that Spain has achieved its target at a bond sale auction, albeit at high costs, also supported risk sentiment. The Dow rose 0.8 percent, the tech-heavy Nasdaq gained 1.2 percent and the S&P 500 added a percent.
Major European averages such as the German DAX, France's FTSE 100 and the U.K.'s FTSE 100 rose between 1.7 percent and 1.8 percent, extending gains for a third day.
by RTT Staff Writer
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