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Individual stocks in the small-cap and mid-cap space might continue to outperform the benchmark Sensex and Nifty indices, said analysts.
The markets are also expected to react to the first set of announcements by the new government and will keenly watch the ministry formation. Stocks are also expected to remain volatile as investors could take risk off the table ahead of derivative expiry.
Companies likely to be directly impacted by government initiatives are likely to remain in focus in the coming days, market players said.
Last week, the benchmark indices posted a third straight week of gains, rising nearly 10 per cent during this period. Following the sharp run-up, analysts say the Sensex and the Nifty could consolidate at current levels, while individual stocks could continue to buzz.
"The market has undergone a sharp rally in consecutive weeks and the important event of the general elections has already unfolded. So a time-wise correction currently being witnessed is essential from a longer term perspective," said a client note by Angel Broking.
Last week, the BSE's benchmark Sensex gained 572 points, or 2.4 per cent to 24,693.35, while the 50-share Nifty of the National Stock Exchange added 164 points, or 2.3 per cent to 7,367.10. The broader market outperformed the benchmarks, with the BSE small-cap index gaining 15.7 per cent and the BSE mid-cap index adding 11.6 per cent during the week.
Analysts said the markets continue to remain in 'bull territory'. "The bias in the market remains upwards. But we could see some profit-booking in stocks that have run up sharply," said Sudhakar Ramasubramanian, managing director, Aditya Birla Money.
Analysts said the shift from defensives to high-beta is likely to continue for some weeks. "We continue to remain positive on financials, as well the realty and cement sector," said Tirthankar Patnaik, director, strategist and chief economist, Religare Capital Markets.
The real estate sector was the top performing one last week, having gained 23 per cent, followed by power which was up 17 per cent and public sector undertakings by 13.6 per cent.
The quarterly and annual economic growth estimates are likely to be announced next week.
