The last leg of earnings, a batch of macroeconomic data and overall FII investment trends will dictate the near-term trend on bourses this week, experts say.
Monday could see some volatility initially as key US jobs data and the Central Statistics Office' advance growth estimates for 2013-14 were released after Indian markets closed on Friday.
"The results of US jobs numbers and GDP growth estimate could have a knee-jerk reaction on the markets," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.
The CSO projected India's economic growth in the current fiscal at 4.9 per cent, marginally lower than the Finance Ministry's estimate of a 5 per cent growth.
Asian markets, which have a bearing on the Indian bourses, are expected to digest data that showed US non-farm payrolls rose by 113,000, below estimates. Unemployment rate hit a five-year low of 6.6 per cent.
"As there are some concerns in the markets due to US tapering and slowdown in China along with other domestic issues, market participants are advised to play safe," said Saurabh Jain of SMC Investments and Advisors.
Locally, consumer price index data for January would come out on Wednesday. Data on industrial production for December 2013 will be out on the same day. The widely-tracked wholesale price index is slated for release on Friday. Any softening in price rise will firm up hopes of a rate cut, said traders.
Raghuram Rajan after taking charge as RBI Governor last September has raised interest rates by 75 basis points in three out of his four monetary policy announcements, citing elevated inflation as a major cause of concern.
However, he had said last month that if inflation is cut down to a tolerable level during the course of the year, this would give the RBI more room to take policy action later.
Meanwhile, major earnings this week include Tata Motors, Jaiprakash Associates, Tata Steel, Dr Reddy's, Cipla, Coal India, ONGC, Sun Pharma, Hindalco, SBI, DLF and M&M.
If earnings match expectations, consolidation could be on the cards after the BSE Sensex lost 137 points on a weekly basis to close at 20,376.56 on the last session.
Of late, global worries have had an impact on Foreign Institutional Investors (FIIs) flows as well. Overseas investors pulled out nearly Rs 1,700 crore from the Indian stock market in the first week of the month.
Capital outflows also have a bearing on the Indian rupee, that closed at 62.28 versus dollar last week.