Indian shares are expected to continue their rally this week on hopes of fresh fund allocations for 2006 after massive gains in 2005, dealers said.
The Mumbai stock exchange's 30-share Sensex closed on Friday at 9,397.93, up 141.02 points from the previous week's close and 42.33 percent over last year's 6,602.69.
"The present rally will continue this week and also in the near-term amid bouts of profit taking at higher levels," said Hemen Kapadia, partner at investment advisory firm, Morpheus Inc.
He said investors were expected to consolidate their holdings at higher levels as Indian companies start announcing their third quarter to December results from the second week of January.
"The present momentum will continue to the initial few weeks of the new year," said Vijay Tilakarj, chief dealer at domestic brokerage Prabhudas Liladhar.
He said the key factor to drive gains in the near term would be fresh fund allocations by overseas investors.
"For the last two years foreign funds have been huge investors in Indian stocks and I see no reason why it cannot continue next year given our robust economic growth," he added.
Foreign funds have invested nearly 19 billion dollars in Indian stock markets since January 2004, of which 10.6 billion dollars were in 2005.
"This year we saw double-digit growth in foreign fund investments and that is a healthy sign as we have seen hefty returns on those investments," Tilakraj said.
The Indian economy's robust growth has been the key driver for attracting foreign funds.
Dealers said sectors such as software would see strong activity this week ahead of quarterly results of technology companies such as Tata Consultancy, Infosys and Wipro.