The Dalal Street is likely to trade in a narrow range this week, after posting the longest streak of weekly gains last week, rallying 2.39 per cent since June 2009, analyst said.
Also the short-term bank lending rate hike by the Reserve Bank of India (RBI) in a surprise move late Friday would keep the markets under pressure as interest rate-related sectors could see selling activity, they said.
"There will be a small reaction on the market in the opening trade. Monday and Tuesday could see some selling pressure and realty, auto and banking counters could witness some major reaction to the RBI rate hike," Taurus Mutual Fund Managing Directo R K Gupta said.
Late Friday, the RBI hiked the repo and reverse repo rate (short term bank lending and borrowing rates) by 25 basis points each to 5 per cent and 3.5 per cent respectively, a move which experts feel could lead banks to hike their interest rates.
"The rate hike was expected as inflation is nearing double-digit. The RBI move to squeeze out liquidity from the system would not bring in any long-term downside to the market," another analyst said.
On Friday, the Bombay Stock Exchange's 30-shares index Sensex closed at 17,578.23 points, higher by 0.34 percent, or 58.97 points--its best close in eight weeks. During the month, the barometer has gained 6.5 per cent.
The net inflow from foreign institutional investors has crossed $3 billion level so far in March and the investment is likely to continue in the coming days also, marketmen said.
"We continue to maintain our bias up in the short-term," brokerage house Sharekhan said in its research report, adding the market is in a buying mode currently and that will continue in medium-term also. Also, the downside would be limited as the Futures & Options settlement is due on March 25, which would keep the market edgy.
"There will be pressure on the higher level of the market as negative US cues, RBI rate hike and strengthening of dollar against other currencies would keep the market tepid," SMC Global vice-president Rajesh Jain said.
On Friday, the Wall Street reacted negatively to the RBI rate hike and ended in the red with the Dow Jones Industrial Average settling 0.35 per cent lower at 10,741.98. While the S&P 500 and Nasdaq ended 0.51 per cent and 0.71 per cent down, respectively.
"The impact of rate hike on India Inc's profitability will be seen in the June quarter as at that time the borrowing cost will go up. The March quarter profit would be better and that could trigger the market," Gupta added.
