Indian equity markets will be guided by the US Federal Reserve's call on interest rates and domestic macroeconomic data this week, analysts said.
Market participants will also be keenly focusing on the US Fed's plans to tackle the volatility in the bond yields. Rising US bond yields have attracted safe-haven bets and caused a correction in global equities mainly technology stocks recent weeks.
Indian equities followed global cues throughout the last week. The rise in US bond yield kept the volatility high, swaying between gains and losses.
Although a fall in US unemployment rate and the signing of the stimulus bill helped the market in between, but continuous rising bond yields outweighed market sentiments, analysts said.
During the holiday-shortened last week, the 30-share BSE benchmark index gained 386.76 points or 0.78 per cent. Markets were closed on Thursday on account of Mahashivratri.
"Markets will first react to macroeconomic data viz IIP and CPI inflation, which came in after market hours on Friday. Next, WPI inflation is scheduled for March 15. Besides, updates on COVID-19 situation and related news will remain on participants' radars.
"On the global front, the market will be closely eyeing the US Fed meet for their stance on interest rates and plans to tackle the volatility in the bond yields," said Ajit Mishra, VP Research, Religare Broking.
In a double whammy for the economy, industrial production growth re-entered the negative territory by contracting by 1.6 per cent in January, while retail inflation soared to a three-month high of 5.03 per cent in February on costlier food items.
"The market will be keenly focusing on the upcoming Fed meeting scheduled to be held on the 16th & 17th of March," Vinod Nair, Head of Research at Geojit Financial Services said.
The market would also depend on the investment trend of foreign portfolio investors, movement of the rupee against the US dollar and Brent crude prices.
Extending its gaining streak for the third day in a row, the Indian rupee advanced by another 12 paise to close at 72.79 against the US dollar on Friday.
Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities said, "All eyes will be on the Fed action going forward." "In our view, hardening bond yields and soaring oil prices are expected to weigh on investors' sentiments and may keep markets to remain volatile in the near to medium term," Binod Modi, Head Strategy at Reliance Securities said.
Concerns over bond yields have off late triggered selling pressure in the global equities.