Consistent FII inflows, along with an optimistic RBI policy outcome and hopes of a faster roll-out of an anti-Covid-19 vaccine is expected to give a further push to key domestic stock indices in the week ahead.
Lately, healthy FIIs inflows have powered a rally in stock markets.
The FIIs remained net buyers last week. They invested over $2 billion in the equity segment.
Besides, analysts pointed out that macro-economic signs showing sustenance of demand recovery after the festive season would be key to watch out for investors.
They pointed out that expectations for an economic stimulus in the US and hopes for a vaccine to stop the virus will be the main focus in markets during the week ahead.
However, likely bouts of profit booking as well as expensive propositions will arrest any major upswing.
"While the trigger of RBI policy is out of the way, markets globally now look forward to rising chances of an early US economic stimulus package," said Deepak Jasani- Head of Retail Research at HDFC Securities.
"Post a good weekly close, we may see some more upside in the early part of the week. Stocks that have seen a decent upside over the past few weeks are showing signs of fatigue and profit taking. Attention may shift to stocks that have not performed to that extent so far."
The Indian markets continued their rally for the fifth consecutive week ended on December 4, 2020 with benchmark indices hitting fresh record highs during the week supported by the global as well as domestic cues.
Notably, the NSE Nifty50 closed the week higher by 2.2 per cent and S&P BSE Sensex gained 2.1 per cent.
"Going ahead, the overall structure of the market continues to remain positive," Siddhartha Khemka, head of Retail Research, Motilal Oswal Financial Services.
"Next week, investors would track progress on US stimulus which is again gaining momentum. ECB interest rate decision next week would also be kept on radar."
According to Vinod Nair, Head of Research at Geojit Financial Services: "The banking sector is likely to continue to stay in focus in the coming week as SC may pass its verdict on moratorium."
"Importantly, in the near-term, we feel that PSU Banks can outperform as price and valuation wise they are still much cheaper than private banks and they have not yet participated in the rally in the market and banking industry."
"In the last three months, private banks were up by 30 per cent while PSUBs (Nifty PSUB index) were even less than halve. On a valuation basis, Price to Book Value of PSUBs is at 0.4x compared to 2x of NiftyBank Index."
Additionally, macroeconomic data points like the Index of Industrial Production (IIP) will be keenly watched by investors.