Short-term volatility may persist in key Indian equity indices, as profit booking dents investors' risk-taking appetite during the upcoming trade week, market observers said.
However, on a weekly basis, the key equity indices are expected to rise further on the back of a dovish US Fed and strong economic macros.
Additionally, other factors like inflow of foreign funds and a strengthened rupee are expected to buoy investors' sentiments.
"Large-cap indices may take a breather to enter consolidation and the mid and small cap stocks are likely to rise in the coming sessions," said Sahil Kapoor, Chief Market Strategist-Research, Edelweiss Wealth Management.
"NSE small-cap index has formed a double bottom which should be the focus area for the next few weeks."
Last week, the domestic market touched fresh six-month high as banking and financial services sector drove the pre-election rally.
"Reduced geopolitical tension, an expectation of a stable government post-election, strengthening rupee and the recent FII buying activities boosted the sentiments of the investors," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors.
"Nifty is expected to move in the range of 11,300-11,500 points, while bank nifty is expected to move in the range of 28,800- 29,600."
According to Vinod Nair, Head of Research at Geojit Financial Services: "Probability of a stable government formation at the centre and the inflation being continuously below the RBI's target has increased the scope for the rate cut in the near term."
"Minor profit booking is expected, given sharp run-up in domestic markets and global factors. However, the downside will be capped as emerging markets like India are likely to benefit from strong liquidity and reversal in FII flows."
Besides the US Fed meeting on March 19-20, investors are expected to keep a close watch on the direction of foreign fund flows and the rupee's movement against the US dollar.
On a weekly basis, the rupee strengthened by Rs 1.75 to close at Rs 69.10 against the US dollar from its previous week's close at Rs 70.85.
"Rupee closed at 69.10 after an appreciating spree on account of stupendous flows in equity markets...," said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.
"RBI swap announcement also did little to stem the appreciation. RBI may keep on buying in spot markets to ease the appreciation pressure and provide rupee liquidity in the market."
"The rupee is expected to range between 68.50 and 69.30."
On the investment front, provisional figures showed that so far during March foreign institutional investors (FIIs) bought stocks worth Rs 17,055 crore.
On technical levels, the National Stock Exchange's (NSE) Nifty50's underlying trend remains bullish.
"Technically, with the Nifty breaking out of a 4-month trading range, the underlying bias has turned bullish," said Deepak Jasani, Head of Retail Research for HDFC Securities."However, given the sharp rally seen recently, markets could witness a minor correction or consolidate in a range for the near term."