Global markets including India will be keenly watching developments in Ireland and China on

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Monday after Friday’s panic selling.

Unlike in the past, the post-Diwali week saw a lot of action with Sensex and Nifty paring their sharp gains on global cues, which are expected to cast a shadow on Monday.

After setting closing highs during muhurat trading on November 5, Sensex has shed 848.07 points, or 4.04 per cent, and Nifty 240.80 points, or 3.81 per cent.

Investors will be closely following Ireland’s efforts to calm financial markets.

“Ireland’s debt problems are mostly linked to one big bank and are different from those of Greece, which was caused by a lack of economic competitiveness in addition to fiscal woes,” IMF managing director Dominique Strauss-Kahn was quoted by Bloomberg as saying.

IMF has extended support to Ireland, which according to some estimates may need a bail-out package of as much as 50 billion euros.

How the Chinese equity market opens on Monday will also provide cues to other Asian markets after the Shanghai index fell five per cent on Friday on fears of regulatory action. The fall on Friday was the Shanghai index’s biggest single-day drop in more than a year.

Domestic markets were also spooked by lower IIP numbers for September. Finance minister Pranab Mukherjee said the fall in the index of industrial production for the second consecutive month was a matter of concern.

But some economists said there was no cause for concern, even though the September IIP at 4.4 per cent was a 16-month low.

“The lower IIP number, though below our expectation, should not be a cause for concern as it is partly the reflection of the change in the base of IIP series from 1993-94 to 2004-05. Moreover, the high base of the previous year has also played a role in dragging IIP numbers down,” Arun Singh, senior economist, Dun & Bradstreet Information Services India, said.

Goldman Sachs’ Tushar Poddar said the September IIP data showed a soft patch in industrial activity. “We would, however, caution against interpreting the year-on-year August and September softness as a sign that demand is slowing. The late burst of monsoons may have had a role to play in the downside surprise,” he said in a note.

Goldman Sachs expects the positive tailwind from the better-than-expected monsoon to increasingly manifest itself in stronger consumption in the second half of 2010-11.

According to a Bloomberg survey of 1,030 investors, analysts and traders, India is the third best place to invest after China and Brazil.

Also, the success of the follow-on public offer from Power Grid will be a comfort factor for the market. The FPO was subscribed 14.88 times with retail and employee quota getting fully subscribed along with those of qualified institutional buyers and high net worth individuals.

Foreign institutional investors generally play a key role in the Indian market. If fresh inflows resulting from the quantitative easing in the United States start to trickle in, then the market is expected to get better, said brokers.

FIIs were net sellers of equity worth Rs 782.27 crore on Friday. But, for the entire week, they were net buyers to the tune of Rs 106 crore.

So far this calendar year, FIIs have been net buyers of Indian shares worth $28.68 billion from both the primary and the secondary markets.