The stock market is likely to consolidate this week as investors are expected book profits after the recent rally, but it will be largely guided by signs of further economic reforms by the government, say experts.
Besides, investors will gradually turn focus on the second quarter corporate results that are to be announced from the second week, they said.
"Markets will consolidate and move up in-line with further announcements on core reforms, which are now widely anticipated," Dipen Shah, Head Private Client Group Research, Kotak Securities said.
He added, however, "Any move from China to support its economy will be an added positive, particularly for commodities".
This week, the stock market will remain closed on Tuesday, on account of Mahatma Gandhi Jayanti.
"Markets will also watch out for fiscal initiatives from the government and expectations are high on this front. The September inflation numbers will be more important as they will play a part in the RBI's rate decision in its next policy review meeting," Shah said.
Besides, auto and cement shares will be in focus this week as companies from these two sectors will announce their monthly sales volume data for September.
The BSE 30-stock benchmark Sensex ended marginally higher for the second consecutive week, touching 14-month high of 18,762 due to some buying towards the end of the week on the back of global rally triggered by Spain announcing a crisis budget for 2013.
According to CNI Research CMD, Kishore Ostwal: "It seems the euphoria will slow down and some profit-booking is expected in a truncated week."
Earlier this month, the government announced reform initiatives like opening up the multi-brand retail chains to foreign direct investment (FDI) and allowing foreign carriers to pick up stake in domestic airlines. It also liberalised FDI norms for the broadcasting sector.
Meanwhile, the government has said the rupee could touch the 50-mark to a dollar in the next four months on the back of strong inflow of foreign funds.
"If rupee further strengthens, which we hope it will, with the steps the government is taking, we expect it could even touch 50 in the next 2-3 months or four months," Department of Economic Affairs secretary Arvind Mayaram had said on Friday.
The rupee on Friday rose to an over five-month high of 52.49 against the dollar on strong capital inflows and hopes of more policy reforms. The local currency ended the week at 52.85 a dollar.
The appreciation of the rupee will help cut down the subsidy bill and cool down inflation, which stood at 7.55 per cent in August, he had said.