Indian markets set to sing old favourites

But any sell-off in the leading software stocks will not result in any sustained weakness as buying will return at lower levels, he said.

"Only a few players will have a competitive advantage in the international software market and a sell-off is imminent in the riff-raff stocks," said R Sukumar, fund manager at Kothari Pioneer Asset Management Company which manages 25 billion worth of investments.

A switch to the old favourites is also being driven by other fundamental reasons as well.

"Some of these stocks have been beaten down considerably and now offer cheap valuations, while in some sectors like cement, higher prices have triggered buying," said Shah.

Cement shares, which have held centre stage this month, started rising after data released by the Cement Manufacturer’s Association showed a 15.5 per cent rise in despatches in October and the rally extended after several leading firms hiked prices.

Associated Cement Companies rose 35 per cent, Larsen and Toubro was higher by 18 per cent and both Grasim Industries and Gujarat Ambuja Cement were up 15 per cent in November.

Shares of Tata Iron and Steel Co and Steel Authority of India rose 20 and 30 per cent respectively this month on expectations of increased infrastructure spending.

The Bombay index which closed 15.94 points higher at 3,868.34 on Friday has edged up four per cent in November. No trend reversal yet: However, analysts hesitate calling it a wholesome recovery. "It is too early to say if the markets have recovered, the Bombay index will have to break the resistance at 4,030, after which 4,200 will be the next target," said Ramesh Damani, member-broker at the Bombay Stock Exchange.

Technical analysts said the five, 20 and 50-day moving average of the Bombay index which were converging will offer a strong resistance at the level of 3,950.

"Until the index clears this level and closes above it for two sessions, I will not be in a hurry to buy," said G Devanathan, technical analyst at Kaycee Trading Private Ltd.

"Currently there are no triggers for the market and it will have to be seen how strongly the bulls react to Nasdaq’s close and on the political developments in the US," Devanathan said.

US markets ended the week on a positive note after being plagued by uncertainty over the eventual outcome of the presidential elections and further sell-offs in the ravaged tech sector.

The technology-packed Nasdaq Composite Index rebounded sharply on Friday to close up 5.41 per cent at 2,904.38, while the Dow Jones Industrial average closed up 0.68 per cent at 10,470.23.

But some analysts felt the market was unlikely to react appreciably to the Nasdaq rally.

"The lead-lag effect of the Nasdaq is slowly going away and a surge in software stocks only on the strength of new money which is unlikely before January," said Shah referring to the annual financial allocations made to various markets by global funds.