The domestic market is likely to dance to the tunes of global cues.
Though European leaders last week agreed to expand a bailout fund to stem the region's debt crisis, there are still some serious doubts if the implementation will be successful.
Equities across the globe saw frenzied buying on the back of the Euro-zone pact. Several countries, including India, witnessed fresh inflow from foreign investors.
But the president of the European Central Bank warned that the debt crisis, which has crippled Europe in recent months, is far from being resolved. Mr Jean-Claude Trichet, who is demitting office on Sunday, urged Euro-zone Governments to stick to their promises and reduce the levels of unsustainable debt.
Fresh worries are arising that the debt crisis might spread to bigger economies such as Italy.
Meanwhile, analysts, after remaining cautious in the last six months, have turned bullish on Indian markets, as the Reserve Bank of India had indicated that it might not go in for another rate hike if inflation does not shoot up.
The RBI has kept the inflation projection intact at 7 per cent. The central bank said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 and then continue down a steady path to 7 per cent by March 2012. However, food inflation surged to 11.43 per cent in mid-October, sharply higher than the previous week's annual rise of 10.6 per cent, mainly on account of the statistical base effect of the previous year.
As global uncertainty still lingers, activity is likely to be centred around event-specific stocks.
Auto and cement companies are likely to announce their monthly sales and despatch figures this week. BPCL, ONGC, Sun TV Network, Ashok Leyland, Bharti Airtel are declaring their September quarter financial performance this week.
Assocham had said that domestic demand is helping the Indian economy, but signs from Europe's debt crisis and a faltering US recovery are worrying.
Though results for the second quarter so far suggest a relatively healthy state of affairs for Indian corporates, fears are mounting that the global financial contagion may pull down growth in developing countries.
According to a Business Line study, profits for 300 companies (excluding finance and banks) have expanded by just 13 per cent in July-September 2011 over a year ago. The same companies did much better in the June quarter, reporting a 24 per cent year-on-year profit growth.