MUMBAI: The benchmark indices may extend their gains this week on hopes of interest rate cut by the Reserve Bank of India (RBI) and an announcement of special session of Parliament to clear the GST Bill.But the upside may be capped for Nifty around the 8,650-8,700 levels due to technical factors; the index had faced resistance in the past at these levels.Traders have constructed fresh long positions in rate-sensitive sectors on Friday, particularly banking, as the government has initiated plans to revive public sector banks.Nifty dropped 46 points, or 0.54%, last week to settle at 8,518, above the psychological level of 8,500; the index witnessed its biggest single-day gain of 162 points in seven months on Friday. Sensex declined 169 points, or 0.6%, during the week to close at 28,067, above the crucial 28,000-mark. “Markets are anticipating an interest rate cut by RBI; we are also expecting the same as consumer inflation has eased substantially,” said Dhiraj Sachdev, senior vice president and fund manager HSBC Global Asset Management.“Any market correction will be shortlived because improving macroeconomic indicators are attracting global funds, while inflows from retail investors will also keep the market momentum going.”Nifty for the seventh time since May this year has crossed the crucial 200-day moving average (DMA) last week, but it failed to hold on to the crucial mark in the past six occasions. However, Nifty closing above the psychological level of 8,500 last week, will give the muchneeded comfort to traders.“Nifty gained more than 150 points in the last session, we expect this positive momentum to remain intact in the near term,” said Amit Gupta, head of derivatives at ICICI Direct. “We recommend traders to construct long positions if Nifty remains above 8,450. Shares from the banking and technology space are likely to perform better in the current recovery.”Market participants are also betting that the worst for the rupee may be over as the currency bounced back from its intraday low of 65.37 on Friday, its weakest level since September 2013. The rupee closed above the crucial 65 level against the dollar at 64.98 on Friday.“We believe Nifty may witness fresh round of short covering at 8,600 call option strike, which may propel the index towards 8700 levels, and in the current move, Nifty may not drop below 8,400,” added Gupta.