Now that the reporting season having almost come to an exn, the rupee's movements against the greenback, economic data out of the U.S. and other parts of the globe and the trend in global markets will set the trend for the Indian bourses over the next few weeks.
The market, which saw some weak spells last week and came off the historic high it had scaled on the Muhurat session (3 November), will be banking heavily on inflow of funds from foreign institutional investors for any sharp reversal in fortunes.
FIIs kept a low profile last week, and in fact, they have bought shares worth a net 4000 crore (approximately) in the current calendar month so far. In the event of the U.S. Federal Reserve choosing to scale down its asset buying program, inflows from FIIs may well see a significant drop.
The rupee's slide against the U.S. dollar contributed a bit to the market's decline last week. After coming back strongly from historic lows, the rupee turned weak once again, breaching the 63 a dollar mark. Though the RBI governor has stated that the rupee will stabilise, more downside is not ruled out for the currency in the near term. IT stocks may surge higher, riding on a weak rupee, but shares of several top notch firms in the manufacturing sector are likely to experience a tough ride as the rising dollar will raise their debt burden.
Wall Street ended on a positive note on Friday, with traders picking up stocks amid optimism the U.S. Federal Reserve's asset buying program will continue atleast till early next year. The Dow Jones Industrial Average and the Nasdaq composite index ended higher by 0.5% and 0.3%, respectively.
Though Wall Street's positive close is likely to set up a steady start for Asian markets on Monday, a sharp upmove is quite unlikely as the outlook for the global economy remains somewhat uncertain.
Activity will be mostly stock specific with July - September earnings reports and company specific news setting the trend for most part of the coming week.