The long-overdue correction in the valuations of blue-chip equities is likely to take the booming Indian stock market in its grip in the week ahead as investors adopt a cautious approach at the current levels.

Analysts and equity traders say the trading pattern in the market, which has staged a smart rally in the past few sessions on sustained buying, will also be influenced by the inflow of overseas investments.

The stock market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed Friday at a new al-time high of 7,635.42, representing a gain of 212.17 points or 2.8 percent over its previous week's close.

The market benchmark bettered its all-time closing high of 7,605.03 touched Wednesday on across-the-board buying interest.

The stock market closed in the positive zone for the 13th consecutive week, making it one of the best performing bourses globally in the current year on hopes that a normal monsoon would boost economic growth in the current year.

India's blue-chip equities had soared sharply higher in the last few weeks' trade on hopes that a normal monsoon would boost economic growth in the current fiscal year in Asia's fourth-largest economy.

"It will be very rational if the market sees some correction in the coming days after witnessing hectic buying activities all these weeks despite some negative development," said Deepak Shah, an analyst with a domestic brokerage firm.

"One need not be very panicky even if the correction sets in at this stage as this will give a good opportunity to retail as well as fund investors to buy some of the heavyweight stocks at lower levels," Shah told.

Experts say the trading pattern in the coming week would also be influenced by the flow of foreign institutional investments, termed as the backbone of India's liquidity-hungry equity market, into the domestic trading ring.

Overseas funds have invested a whopping $1.28 billion in Indian equities in the current month so far after pumping in $1.23 billion in June. This compares with a sell-off of $261.30 million in May and $149.50 million in April.

Foreign institutional investors collectively put in a record $8.5 billion in the last calendar year, up from $6.5 billion worth of inflows in 2003.

"It is basically increased liquidity inside the trading ring that is taking the market index to record levels almost every trading session," said a broker with the Bombay Stock Exchange.

"If this overseas investment momentum continues in the days ahead as well, then I don't see any reason why the market won't be able to maintain its current levels," he added.

In the intra-week trade ended Friday, the stock market opened for the week on a sharply positive note with the index touching a new all-time high on across-the-board institutional buying interest.

The positive rally continued on the bourses for the next three sessions despite two major negative developments.

All the financial markets were closed Thursday following flooding caused by worst rains in 100 years in Mumbai that killed over 250 people and destroyed business as well as personal properties.

Investors had also turned panicky briefly following destruction of the state-run Oil and Natural Gas Corporation's Bombay High North oil platform in a major fire that also killed 11 officials.