The Uddhav Thackeray-led party also thinks that public support for its ally BJP is waning in the country and it can capitalise on the "failures" of the Devendra Fadnavis government by going to the polls alone, they said.
The decision, which will split saffron votes, also opens up possibilities for the opposition Congress and the NCP to mount a stiff challenge to the BJP, the observers said.
The regional outfit, which shares a blow hot blow cold relations with the BJP, also announced that it would contest Assembly elections across the country.
Sudheendra Kulkarni, Chairman of the Observer Research Foundation, a city-based think-tank, said the state's politics is going to be much more "unstable, uncertain and unprincipled" in the future.
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"The Shiv Sena has come to the conclusion that the popular support for its partner BJP is waning in Maharashtra and also across the nation," Kulkarni told PTI.
He said the split between the long-standing saffron allies will further fracture Maharashtra's politics.
"The state has suffered badly because of the four-way split in its polity - represented by the Congress, the NCP, the Sena and the BJP. Even the two rival alliances (Sena-BJP & Congress-NCP) have never been cohesive.
"No single party is likely to form a government (in Maharashtra) in the near future," said Kulkarni.
"Their relations changed as soon as the BJP, riding on the popularity of Prime Minister Narendra Modi, won more Assembly seats (in Maharashtra) in the last polls. The Sena is also upset that its demands are not being met," he said.
The senior analyst said it remains to be seen if the Congress and the NCP seize the opportunity and take advantage of the split in saffron votes.
"If the Modi magic continues in 2019, it will benefit the BJP. If not, it will benefit the Congress and the NCP more than the Sena," Joshi said.
Both the BJP and the Sena are playing pragmatic politics, he said.
"The two main players who stitched this (alliance) were Bal Thackeray (Sena) and Pramod Mahajan (BJP), and they are no more now.
"It is necessary for both to test their alliance again. I dont think there is a risk. I think both will assess their strengths and weaknesses and take it from there. Its just pragmatic politics," he said.
"The BJP will have to tread carefully because it has a lot to lose. It is confronted with a lot of ifs and buts and the alliance break-up has added to it. It has no face in Maharashtra and then will have to borrow the PM's face to try and register a win," Ranade said.
Veteran journalist Kiran Tare said the Sena thinks there is a strong resentment against the BJP.
"(Sena chief) Uddhav Thackeray does not want to carry the government's failure on farmer loan waiver and maintaining social harmony on his shoulders," Tare said.
Tare said by opening its cards so early, the Sena has given the BJP enough time to plan its strategy to minimise the impact of the break-up.
"The Congress and the NCP may come together. But it will not help the Shiv Sena. Uddhav Thackeray has given much more time to the BJP to go for poll preparations.
He said the opposition may get a boost only if there is a bigger anti-BJP alliance consisting of the Congress, the NCP and the Sena.