YES NIMESH,

BOTH XTAL1 AND XTAL2 SHOULD SHOW OSCILLATIONS.

IN FACT AS XTAL1 IS INPUT TO OSCILLATOR AMPLIFIER THE SIGNAL WILL APPEAR SMALLER THAN THAT ON XTAL2 WHICH IS THE OSCILLATOR OUTPUT PIN.

DID YOU OBSERVE ALE AND PSEN?

ALSO THE PROBLEM COULD BE RESET PIN. IF THIS PIN REMAINS HIGH THEN THE MCU DOES NOT COME OUT OF RESET STATE AND ALE AND PSEN MAY FLOAT OR SHOW WEAK HIGH. HENCE RESET PIN MUST COME TO LOW.

IF INTERNAL PULL DOWN RESISTOR IS TOO HIGH FOR A LEAKY RST CAPACITOR CONNECTED TO VCC THEN YOU MAY EXTERNALLY CONNECT A 50-100K PULL DOWN ON RESET PIN.

HITESH