The domestic stock market may face volatility amid the monthly derivatives expiry scheduled this week, while investors would mainly await the outcome of RBI's interest rate decision on Friday, said analysts.
Global market movement would also continue to drive sentiment amid a bearish trend recently following rate hikes by the US Federal Reserve and other central banks.
The Reserve Bank of India (RBI) may take cues from its global counterparts to raise interest rate for the fourth time in a row to control inflation.
The RBI, which has since May raised the short-term lending rate (repo) by 140 basis points (bps), may again go for a 50 basis points increase to take it to a three-year high of 5.9 per cent, say experts.
Vinod Nair, Head of Research at Geojit Financial Services, said for the week ahead, investors will keenly watch the outcome of the RBI monetary policy on September 30.
"We expect the market direction will be led by global developments and FIIs' (Foreign Institutional Investors) action," Nair added.
The domestic benchmark indices depicted a bearish trend last week amid a global equity market sell-off.
"Global cues are expected to dominate this week as well, but RBI policy and September F&O expiry will lead to volatility in our market. US GDP numbers will be important," said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Markets will also be guided by the trend in the rupee, which breached the 81-mark against the US dollar for the first time ever on Friday.
"We expect volatility to remain high as we have important events like MPC's monetary policy review meet and monthly derivatives expiry scheduled during the week. Besides, the prevailing pressure in the global indices would continue to weigh on the sentiment," said Ajit Mishra, VP - Research, Religare Broking Ltd.
Apurva Sheth, Head of Market Perspectives at Samco Securities, said the much-anticipated GDP growth numbers of the US will be keenly studied by the global markets.
"The outcome of the RBI MPC meeting will be the main topic of discussion at home," he added.
Last week, the Sensex lost 741.87 points or 1.26 per cent, while the Nifty declined 203.50 points or 1.16 per cent.
Deepak Jasani, Head of Retail Research, HDFC Securities, said the Indian markets fell for a second consecutive week amid a global sell-off as investors looked to align to a tighter monetary policy regime, even as the rupee's slide threatened to reverse the positive foreign flows into the domestic market seen since July.
"India would continue to take cues from global front as well as upcoming RBI meeting," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.