With the onset of the year-end festive period, lower participation and thinner volumes are anticipated. On the domestic front, investors will track infrastructure output numbers, updates on bank credit and deposit growth, and movements in foreign exchange reserves. Trends in the rupee and crude oil prices are also likely to influence market direction.

Globally, cues from major overseas markets, especially the US, will be closely monitored, said Ajit Mishra, Senior Vice President (Research) at Religare Broking Ltd. According to market participants, strong domestic liquidity continues to cushion the market against sharp downside risks and provides stability to the overall structure. At the same time, a gradual return of foreign fund inflows is being seen as a possible trigger for the next phase of market upside, helping improve risk appetite, said Ponmudi R, CEO of Enrich Money, an online trading and wealth tech firm.

However, analysts cautioned that the durability of the recent momentum will depend on key global macroeconomic signals, particularly upcoming US GDP and core personal consumption expenditure (PCE) data, which are expected to offer further clarity on growth and inflation trends in the US economy.

Market sentiment has turned relatively constructive after softer-than-expected US inflation data revived hopes of additional monetary easing by the US Federal Reserve, a backdrop that has historically been supportive for emerging market equities, including India, Ponmudi R added.

Last Week Stock Markets Recap

Last week, benchmark indices ended lower, with the BSE Sensex falling 338.3 points or 0.39 per cent and the NSE Nifty slipping 80.55 points or 0.30 per cent. Selling pressure dominated most sessions, though a recovery on the final trading day, aided by value buying and renewed interest from foreign portfolio investors, helped cap losses, Mishra said.

On Friday, the 30-share Sensex rose 447.55 points or 0.53 per cent to close at 84,929.36, while the Nifty gained 150.85 points or 0.58 per cent to settle at 25,966.40.

Analysts expect markets to remain range-bound with a mild positive bias this week, supported by signs of improving foreign investor participation after two consecutive sessions of buying and a marginal recovery in the rupee against the US dollar. With holiday-induced lull in global markets, attention will remain on key data releases, including GDP numbers from the US and the UK, as well as US consumer confidence data.

Overall, market movement is likely to stay sideways, with investor focus gradually shifting towards the upcoming third-quarter corporate earnings season, said Siddhartha Khemka, Head of Research (Wealth Management) at Motilal Oswal Financial Services Ltd.