"The Nifty has given a bullish breakout on the daily charts and the targets for next week are 5300-5500," said Dharmesh Bhatt, technical analyst at brokerage IDFC-SSKI India. He expects the index to find support at 5080.
A cause for concern is the high intraday volatility witnessed in the last few sessions, dealers said. Another worry is continued spurt in inflation. Inflation for the week ended May 3 rose to a fresh three-and-a-half-year high of 7.83 per cent, versus 7.61 per cent a week earlier.
Finance Minister P Chidambaram today said spike in headline inflation rate was worrying and both fuel and manufacturing groups were pushing up the wholesale price index.
"The movement from 7.61 per cent to 7.83 per cent is worrying. Amid the dark clouds, there is a silver lining...The prices of primary articles have declined. (Price of) food has declined," he said.
Most sectors are facing increasing challenges amid high interest rates, soaring inflation, currency fluctuations, slowing economic growth and uncertain market conditions, brokerage India Infoline said in a note.
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India Infoline is cautious on public sector oil companies, and steel and cement companies, as they are likely to bear the brunt of government's inflation-fighting efforts.
Dr Reddy's Laboratories, Suzlon Energy, Housing Development Finance Corp, Bharat Heavy Electricals, and ITC could see some action because of their January-March earnings next week.
IT: Strengthening times
The weakening rupee is likely to strengthen the information technology shares, which are seen rising next week with foreign investors showing interest in the segment, dealers said. Investors will also take cues from Tech Mahindra's January-March results to be declared on Monday.
In the short term, these stocks may outperform the market but in the long term the outlook is not very favourable as uncertainty still prevails in the US economy, he said.
Cement: Choppy road ahead
The movement in share prices of cement companies is seen choppy with a negative bias next week on concerns over pressure on their operating margins following a cut in prices of the commodity.
The cement makers agreed to the government's request to cut prices by Rs 3-7 per 50 kg in some states to bring uniformity in prices across the country.
Finance Minister P Chidambaram, however, said this reduction in prices was not enough and "there is still significant scope for reduction in cement prices."
Analysts expect these price cuts to further erode cement companies' operating margins, which are already under pressure due to rising input costs.
Steel: Looking up
The shares of steel companies are seen up next week on hopes there will be no further policy impediments for the industry, analysts said.
The government has taken a series of measures, including imposition of export duties of 5-15 per cent steel products as well as abolition of 5 per cent import duty on steel and 14 per cent countervailing duty on some long products.
Companies that make primary and value-added steel products have cut prices by Rs 2,000-4,000 a tonne and have agreed to hold the price line for the next three months.
Analysts said next week may see action on SAIL and Tata Steel counters, as both these companies stand out among steel makers with their captive reserves.
Seelmakers could be hoping for some good news in the form of a complete or partial rollback of the export duty.
Oil: Down the barrel
The shares of state-run refinery-cum-marketing oil companies are seen bleak next week due to the unabated rise in crude oil prices coupled with lack of any concrete steps by the government to protect the companies from mounting revenue losses, analysts said.
The benchmark June contract on the New York Mercantile Exchange touched a new record high of $127.42 a barrel.
State-run oil marketing companies are estimated to incur gross revenue loss of around Rs 1.8-2.0 trillion in the current financial year to March on sale of products at subsidised rates.