Indian shares likely to remain volatile as an unexpected hike in the repo rate would hit already sagging earnings growth of companies and ahead of September derivatives expiry on Thursday.
Reserve Bank of India Governor Raghuram Rajan surprised markets in his maiden policy review on Friday by raising interest rates to ward off rising inflation, while scaling back some of the emergency measures put in place to support the ailing rupee.
Traders say with the U.S. Federal Reserve's tapering of its monetary stimulus off the table for now, foreign inflows could be key to support the market in the short term.
FIIs bought $576.27 million in Indian equities on Thursday, data from India's market regulator showed.
KEY FACTORS/EVENTS TO WATCH
Mon: Second-half borrowing calendar details (tentative)
Fri: Foreign exchange reserves data. Balance of payments, current account deficit, external debt data due to be announced at 5 p.m.