With mixed signals on the economic front, stock market is likely to see volatility this week as investors track Reserve Bank's policy as well as US government's monetary easing steps, feel experts.
Besides, foreign investors are expected to closely watch government's initiatives amid a depreciating rupee.
"The RBI meeting on Monday will be an important trigger for the market. Expectations are mixed on whether the RBI will cut rates or not," Kotak Securities Head (Private Client Group Research) Dipen Shah said in a research note.
Industry is anticipating the central bank to slash rates to boost sagging growth even as there are concerns that easing money supply would further weaken the rupee.
According to analysts, stocks are expected to see volatile trading as the next moves of RBI and the US Federal Reserve would be crucial in determining overall investor sentiment.
Snapping a three-day losing streak, the benchmark S&P BSE Sensex had jumped nearly 351 points to close at 19,177.93 points on Friday as drop in WPI inflation rekindled hopes of a rate cut.
Meanwhile, the US Federal Reserve meeting this week would be closely tracked for cues on the future of quantitative easing policy.
Investors are also anticipating more reform initiatives with finance minister P Chidambaram hinting at more such steps to boost spur growth that has hit 10-year lows.
Apprehensions about American monetary easing policy is cited as a reason for the sharp fall in rupee, which closed at 57.51 against the dollar on Friday.
The currency slumped to a life-time low of 58.98 in the intra-day trade against the dollar on June 11.
Analysts felt investors' expectations come against the backdrop of mixed economic signals such as falling inflation and declining industrial growth.
The WPI-based inflation dropped to a 43-month low at 4.7% in May whereas industrial growth rose just 2.3% in April.
In recent days, Foreign Institutional Investors (FIIs) are on a selling spree in the domestic stock market.
Going by official data, foreign entities pulled out over Rs. 17,000 crore in the last two weeks as rupee continued to take a beating.