Experts said there may be some investor caution on a possible fallout of CAG reports, tabled in Parliament on Friday, estimating financial benefit of over Rs 3.06 trillion to private parties in coal blocks allotment without bidding, Delhi airport development and diversion of coal to a power project.
Some analysts said that when the markets open on Tuesday--Monday being a holiday on account of Eid--investor sentiment may be guided by the government moves to push reforms and attract investments.
In a bid to revive investments across the board, Finance Minister P. Chidambaram has asked banks to cut interest rates and keep EMIs at affordable levels to encourage sale of consumer durables to restart the engine of manufacturing.
After a review meeting with the chiefs of public sector banks on Saturday, he also announced rescheduling of farm loans in drought-affected states and revision in procedures for easy sanction of education loans to students.
Markets may see some profit-booking this week as the Sensex has extended gains for the third consecutive week by surging another 133 points on sustained capital inflows.
"For this week, the 5,300 level for the Nifty shall be decisive on the downside and the 5,400 level on the upside. The index may be seen consolidating within this range. Profit booking is likely at current levels.
Besides, global markets will also be affecting the overall market sentiment," Rakesh Goyal, vice-president, Bonanza Portfolio, said.
Another analyst, Unicon Financial Solutions chief executive Gajendra Nagpal said: "Stock market mood may remain cautious in the initial part of the week as owing to the CAG report."
Besides, investors are looking forward to more reform measures to spur the economy, he said.
That apart, inflation has shown some signs of easing, raising hopes of interest rate cuts by the Reserve Bank at its monetary policy review next week.
July consumer price index to be announced on Tuesday will be monitored closely.
CNI Research CMD Kishor Ostwal said: "Nifty can correct at the most till 5,300 in the current situation where there is a very strong support. On the upside, it seems 5,500 is capped for the settlement. The next eight trading sessions need to be watched carefully."
Oil prices will also be important as Brent crude rose over USD 100 a barrel last week, raising concerns about domestic inflation.
Stock-specific action will be seen in Maruti Suzuki as the month-long lockout at the Manesar plant will be lifted on August 21 and partial production will resume.