Concerns over stagflation as well as macroeconomic wholesale inflation data and global liquidity flows will determine the key equity market moves in the upcoming week, according to analysts.
Lately, macroeconomic data on inflation and industrial production spooked investors as they indicated that the country's economy has entered into a phase of stagflation.
This trend is marked by simultaneously rising retail inflation and falling gross domestic product growth.
Accordingly, concerns on stagflation and anxiety over the upcoming data on WPI inflation for November will keep investors on their toes.
Last week, retail inflation data for November pointed out that a massive rise in food prices lifted Consumer Price Index (CPI) reading to 5.54 per cent from 4.62 per cent in October.
Similarly, on a year-on-year (YoY) basis, the CPI last month was higher than the corresponding period of last year when retail inflation stood at 2.33 per cent.
The data assumes significance as the Reserve Bank of India (RBI) in its latest monetary policy review maintained the key lending rates on account of rising inflation levels.
Apart from inflation-related data points, investors will look forward to the minutes of the RBI's latest monetary policy review meeting.
Similarly, the 38th GST Council meet is reportedly scheduled on December 18, 2019. This will catch investors' attention.
However, Motilal Oswal Financial Services' retail research head, Siddhartha Khemka, pointed out that despite high valuations, positive global cues along with liquidity flows may help sustain the market momentum next week.
"The current market momentum can sustain next week as well, provided there is more clarity on the US China trade settlement," Mr Khemka said.
"Further, liquidity flows have been supportive which may continue for a while. Government on its part has also been supporting through a series of reforms."
According to Edelweiss Professional Investor Research's chief market strategist, Sahil Kapoor, the US Dollar weakness, revival in base metals, the US-China trade deal and improvement in some high frequency indicators suggested that stocks are likely to rally.
"NSE Mid-cap index appears ripe for a breakout and momentum based uptrend," he said.
Besides, the rupee's movement against the US dollar will influence investors' sentiment.
According to Sajal Gupta, head-forex and rates, Edelweiss Securities, last week the rupee appreciated on the back of Essar Steel deal inflows and the positive US-China trade pact commentary.
The rupee is expected to move in a range of 70.50-71.20 next week from its last close of 71.8150.
Additionally, technical charts showed that National Stock Exchange's Nifty50 remains in an intermediate uptrend.
"Further upsides are likely once the immediate resistance of 12,159 is taken out. Crucial supports to watch for resumption of weakness are at 11,934," said Deepak Jasani, retail research head at HDFC Securities.