Accordingly, investors are eyeing a move by the Reserve Bank of India to ease key lending rates to bring down the cost of finance and give impetus to consumption which can potentially rekindle the economic growth cycle.
The Apex bank will announce the FY20's second bi-monthly monetary policy on June 6, Thursday.
"At this juncture investors should play domestic themes for long term to get healthy returns," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments & Advisors.
"RBI is scheduled to meet next week and it is expected that central bank may slash interest rates by 25 bps."
Currently, the policy repo, or central bank's short-term lending rate for commercial banks, stands at 6 per cent.
The proposed range of repo rate cut assumes significance as the overall economic growth rate in Q4, 2018-19 slowed on the back of slacking consumption due to farm distress, global headwinds and stagnant wages.
"Nifty and Sensex have hit lifetime high on back of a broad based rally. The next phase of move should be supported by an expected rate cut from the RBI. Steep decline in GOI yields is indicative of easier liquidity conditions ahead," said Sahil Kapoor, Chief Market Strategist, Edelweiss Investor Research.
According to Vinod Nair, Research Head, Geojit Financial Services: "Going ahead, there is high expectation on the upcoming budget where the main agenda will be job creation, government spending, infrastructure, manufacturing, exports and tax reduction."
However, volatility in stocks and rupee might flare-up on the back of US's decision to withdraw the Generalised System of Preferences (GSP) benefits extended to exports from India from June 5, 2019.
On the currency front, the Indian rupee last week weakened by 15 paise to close at 69.68 against the US dollar from its previous week's close of 69.53 per greenback.
"Expect rupee to trade in 69.30 to 70.10 range with weakness bias on account of global risk-off...," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
On technical charts, the NSE Nifty50 remains in an uptrend.
"Technically, the Nifty remains in an intermediate uptrend and traders will need to watch if the index can now hold above the immediate support of 11,812 in the coming week for the uptrend to sustain," said Deepak Jasani, Head of Retail Research, HDFC Securities.
(Rohit Vaid can be contacted at rohit.v@.in)
( With inputs from IANS )