After extending gains for the second straight week, domestic stock markets are headed for major economic data releases next week, while investors will also closely watch the Reserve Bank of India (RBI) meeting.

In the week ended 27 November, benchmark indices have posted a gain of 1% on the hopes that the Modi government would be able to pass the key Goods and Services Tax (GST) bill in the ongoing winter session of Parliament.

While the BSE S&P Sensex ended the week at 26,128.20, gaining 259.71 points, the 50-share Nifty was up 86.15 points to close at 7,942.70.

"Nifty broke out on Friday from the recent trading band of 7,700-7,940. With BankNifty leading from the front, advancing ~1.8% in this week's trade, we expect Nifty to sustain this momentum and attempt 8,050 in the near term. On the downside, 7,900 could provide a strong support," said Anil Ambani, Head of Research, IIFL.

Despite a weakness in other Asian markets, the indices showed strength amid increased efforts from the government to get GST bill approved by Parliament in the current session.

Prime Minister Narendra Modi's meeting with his predecessor Manmohan Singh and Congress President Sonia Gandhi on Friday to discuss issues related to GST bill also spurred hopes on its passage in the Rajya Sabha in the session.

Meanwhile, markets will closely monitor the major economic data -- October fiscal deficit, Q3 GDP data and the Nikkei PMI manufacturing data-for clues on growth.

While a Bloomberg poll estimates the country's gross domestic product (GDP) to have grown by 7.3%, any sign of slower growth could dampen the sentiment among FIIs, resulting in further outflows.

October fiscal deficit data will be also scrutinised closely, as the government may miss the fiscal deficit target set for the year 2015-16, upon the implementation of the Seventh Pay Commission recommendations from 1 January, 2016.

However, the RBI meeting will likely be a non-event for the markets as it is widely expected to keep lending rates on hold.

"After a hefty 50bps cut during September, markets do not expect much to happen on the rate front during the December RBI monetary policy review. RBI has undertaken four cuts this calendar year. It is likely that the central bank will pause to gauge the recent spike in food prices and assess whether lower inflationary levels are sustainable," said Ambani.

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