Fluctuations in the global crude oil prices, along with the rupee's movement against the US dollar and the upcoming macroeconomic data points are expected to chart the course of the key Indian equity indices during the coming week.
According to market observers, other factors such as the ongoing quarterly results season and the direction of foreign fund flows will also impact investor sentiments.
"The fall in crude oil prices... should help to soothe the market and the INR sentiment," Devendra Nevgi, Founder and Principal Partner, Delta Global Partners, told IANS.
"The global situation on North Korea and the US-China trade spat would also be closely watched."
Lately, high crude oil prices and geopolitical developments have pushed the domestic fuel prices higher and weakened the Indian rupee.
However, a reversal in the rupee's trajectory was seen late last week as it strengthened by 23 paise to close at 67.78 against the US dollar. Even domestic fuel prices are expected to fall after the Brent crude cost eased to around $76 from $78 per barrel last Friday.
Additionally, the direction of foreign fund flows will play a key role to determine the market movement. Last week's provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 3,227.06 crore.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 2,988.86 crore, or $438.81 million, in the week ended May 25.
"Any negative emerging markets' sentiment will adversely influence the Indian markets too. The domestic institutional investors have become the new anchors of the Indian markets given its matching net purchases to the net FPI sales," Nevgi said.
Besides, crucial data points on the country's 'Fiscal Deficit', 'Index of Eight Core Industries' and the Q1 GDP growth rate will be keenly watched by the market participants.
"Decelerating macro trends like increase in bond yield, rising inflation, INR depreciation and gap in current account deficit might impact market performance over the medium term," said Vinod Nair, Head of Research at Geojit Financial Services.
"This will lower the premium valuation of India..."
Apart from the macro-data points, companies like L&T, NHPC, NMDC, NTPC, BHEL, BPCL, Coal India, Indian Overseas Bank and Mahindra & Mahindra are expected to announce their fourth quarter (Q4) earning results in the coming week.
"Given the weakening macro scenario and likely inflationary pressure in coming months due to crude oil prices, direction of market is completely dependent upon the earnings trajectory of companies," said SMC Investments and Advisors' Chairman and Managing Director D.K. Aggarwal.
"Going forward, unfavourable developments on the macroeconomic front may dent the confidence of the market participants."
On technical-charts, any further upsides in NSE Nifty 50 which has rallied for two consecutive sessions till last Friday are seen after the immediate resistance level of 10,628 points is crossed.
"Technically, with the Nifty rallying for the second consecutive session on Friday, traders will need to watch if the recent gains can sustain early next week," said Deepak Jasani, Head of Retail Research for HDFC Securities.
"Further upsides are likely once the immediate resistance of 10,628 points is taken out. Crucial supports to watch for resumption of weakness is at 10,417 points."
Last week, both the key Indian equity indices -- S&P BSE Sensex and NSE Nifty 50 -- made marginal gains on the back of attractive valuations, as well as a fall in global crude oil prices and appreciation in the Indian rupee.
Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 76.57 points or 0.22 percent to close at 34,924.87 points on a weekly basis.
Similarly, the wider Nifty50 of the NSE closed the week on a slightly positive note. It closed at 10,605.15 points -- up 8.75 points or 0.08 percent.