Volatility may persist in the key Indian equity indices, as global cues -- prospects of trade wars, the rise in US interest rates -- and fears of domestic political instability are expected to dent investors' risk-taking appetite, market observers opined.
"Markets would continue to face headwinds from the evolving political scenario domestically and the prospects of a trade war globally," Devendra Nevgi, Founder and Principal Partner, Delta Global Partners, told IANS.
"Mixed macros data (points), fiscal year-end issues, higher IPO supply will keep the markets capped and range-bound, with lower bias."
According to Vinod Nair, Head of Research at Geojit Financial Services: "The long-term outlook for the domestic market continues to be strong. However, raising concerns of global trade headwinds, domestic NPA issues and upcoming state elections will keep the market in tenterhooks."
"Currently, the market is finding it difficult to stay float at support levels as volatility in global market brought the benchmark indices towards the 200 DMA. US Fed policy meet next week is the key event and the market expects a 0.25 basis points hike."
Besides US Fed's meet from March 20-21, investors are expected to keep a close watch on the direction of foreign fund flows and the rupee's movement against the US dollar.
"Last week, news of the BJP's defeat in by-polls increased the political risk premium on the rupee. We are in a pre-election year, where every regional electoral event will be seen through the lens of 2019," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.
"Over the next week, the most important economic event remains the US Fed's decision on monetary policy. We expect a 25 basis points hike and a hawkish tone, which can be positive for the US dollar. As a result, USD-INR may witness a rally towards 65.30 levels on spot. We expect a broad range of 64.80 and 65.30 levels on spot."
Last week, the rupee strengthened by 24 paise to close at 64.93 against the US dollar from its previous week's close at 65.17.
On the investment front, provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) purchased scrips worth Rs 6,288.23 crore and the domestic institutional investors (DIIs) worth Rs 202.69 crore during the week.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) invested Rs 6,713.73 crore, or $324.81 million, during March 12-16.
On technical levels, the National Stock Exchange's (NSE) Nifty50 remains in a downtrend.
"Technically, the Nifty remains in a downtrend and further downsides are likely early next week once the immediate supports of 10,141 points are broken," said Deepak Jasani, Head of Retail Research for HDFC Securities.
"Immediate resistance is now at 10,405 points."
Last week, the key Indian equity indices -- the Bombay Stock Exchange (BSE) Sensex and the NSE Nifty50 -- receded on the back of political instability, along with the ongoing turmoil in the banking sector and weak global cues.
Consequently, the barometer 30-scrip Sensitive Index (Sensex) slipped by 131.14 points or 0.39 percent to close at 33,176 points.
Similarly, the wider Nifty50 of the NSE closed the week's trade at 10,195.15 points -- down 31.7 points or 0.31 percent from its previous week's close.