Dalal Street is pinning its hopes on institutional investors to kickstart an across-the-board stock buying momentum in the backdrop of the government and RBI taking steps to infuse liquidity into the economy.
Besides, the global cues are also expected to be positive as further clarity is expected on a fresh stimulus package to the tune of one trillion dollars for the US economy, after President-elect Barack Obama meets fellow Democrats and rival Republicans on Monday to reach a consensus on the issue.
"The market will open on a positive note next week and will wait for clarity from buyers and sellers to decide the move. Overall, the opening will be on a good wicket," Arun Kejriwal of Kejriwal Research and Investment said.
The government on Friday announced its last package for the fiscal aiming to enable the industry to borrow more from abroad and FIIs to invest more in the country, besides stepping up public spending.
"The government has made its last effort to speed up growth by infusing money. The stock market would look up to fresh buying by institutional and portfolio investors for a rally from the present levels," Kejriwal added.
The package, among other things, provides for liberalisation of External Commercial Borrowing (ECB) norms and raising FII investment limit in rupee-denominated instruments to $15 billion from $6 billion now.
"The relaxation in portfolio investment limit would bring in more funds in the debt market. Hence, FIIs would prefer to invest here as the domestic currency would gain strength," Ashika Stock Brokers Research Head Paras Bothra said.
Marketmen pinned hopes on the government move with expectations that the domestic currency would stabilise and arrest dollar outflow from the economy.
Besides, the Reserve Bank on Friday announced steps to inject an additional Rs 20,000 crore into the system.
The RBI announced cut in Cash Reserve Ratio (percentage of deposits that banks have to keep with RBI) by 50 basis points to five per cent, short-term lending (repo) rate by 100 basis points to 5.5 per cent with immediate effect and short-term borrowing (reverse repo) rate by similar percentage points at 4 per cent.
"The market is already in an uptrend. By increasing the credit line for the industry, the government is aiming at boosting the sagging demand. This will bring some positive buying sentiment," Bothra added.
"With global market showing signs of relief rally, FIIs would come back here. Sector-specific stocks would perform on sentimental buying," he added.
The government stimulus package is aimed at boosting expenditure on infrastructure, while benefiting the non-banking finance companies and public sector banks.
"Market was expecting some relief for the realty sector. Realty stocks have already been beaten down a lot. The sector is likely to see some recovery in future," Bothra added.
"The market is expected to be in a recovery mode. There would be some positive moves, but no new highs will be scaled next week," Kejriwal added.
"The direction of domestic market would also depend on the US market movement as institutional investors would resume active trading after a gap of nearly two weeks," SMC Global Vice President Rajesh Jain said.
Over the last week, the Sensex gained 629 points while Nifty gained 190 points to 3,046.75.