Domestic economic data releases and the Reserve Bank of India’s money policy review scheduled

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for Friday may set the tone for the equity market this week.

The index of industrial production will be released on Monday, which is expected to show degrowth in industrial activities in October. Market men believe monthly inflation numbers, due for release on Wednesday, may show some decline in November. These two data points will be watched keenly ahead of the RBI policy review, where the central bank is expected to take steps to ensure liquidity in the system.

Advance tax numbers for December quarter, which will trickle in by the end of the week, and global cues — including US FOMC target rate and euro zone cues — will also keep the market on the edge.

“Markets will react to a slew of data points in the coming week and may remain volatile. Factory output numbers and inflation data will provide triggers on RBI’s likely policy stance at its mid-quarter monetary policy review on Friday. The third quarter advance tax numbers are due on Thursday, which may offer some cues on the shape of third quarter earnings,” said Gaurav Dua, head of research at Sharekhan.

Economists expect monthly inflation number to come at 9 per cent for October.

“Through November, prices of food and primary articles have declined 3 per cent and 1.8 per cent, respectively, driving year-on-year inflation rate of both components to below 7 per cent by the end of the month. Assuming a 0.25 per cent month-on-month rise in manufactured goods inflation, we estimate November WPI to come at 9 per cent, a 70 basis points disinflation from the October outturn,” said Taimur Baig, chief economist with Deutsche Bank.

Some experts said while domestic data points will play a crucial role in determining market direction, global cues will also be watched keenly.

“The decision of the EU summit was announced on Friday (Saturday morning in India). So, markets should react to the news on Monday. The street would also be cautious before the October IIP data to be announced on Monday. Given these upcoming events, the market mood may remain cautious,” said Sanjeev Zarbade, vice-president at Kotak

Securities.

Amar Ambani, head of research at IIFL, said: “While valuations of Indian equities may appear reasonable, most investors are not willing to take the bait just yet. The near-term outlook will hinge on political developments and overseas markets.”

On RBI policy meet, Ambani said: “A pause is what the RBI had predicted at its previous meeting. But one has to see what stance the central bank takes now as the rupee’s depreciation has made things worse with the cost of imports shooting up sharply.”

Sensex and Nifty dropped 3.76 per cent and 3.63 per cent, respectively, last week.