Q2 results, FII flows and oil prices to steer markets after last week's sharp rally

The coming week is crucial for the Indian stock market. September-quarter (Q2) results, the stance of foreign institutional investors (FII), global bond yields and crude oil prices are expected to play a big part in deciding the market's direction. After the recent sharp rally, investors will test whether the market can sustain its momentum.

Last week, the Nifty 50 rose 2.77 per cent and the Sensex 3.11 per cent. The rally was supported by renewed buying in IT stocks, easing pressure from global bond yields and steady buying by domestic institutional investors (DII). On Friday, both major indices closed higher for the second straight trading session, strengthening hopes of a recovery after the recent fall.

On Friday, the Sensex closed 413.66 points, or 0.56 per cent, higher at 74,729.27. The Nifty 50 closed 148.80 points, or 0.65 per cent, higher at 23,146.15. Over the week, the Sensex gained 2,256.94 points and the Nifty 625.7 points.

Market participants will now watch the September-quarter results. Investors will look at whether the recent rally is confined to IT stocks or has spread to other sectors. Results and management commentary from banking, consumer and industrial companies will be especially important because they will give a sense of revenue growth, margin improvement and the state of demand.

The guidance companies give for the next quarter will also be important in shaping investor sentiment. Strong results and positive trading signals could support the market, while weak performance or a cautious stance could limit further gains.

The stance of foreign institutional investors (FII) will also matter. Their selling has eased somewhat, but if the trend continues the market could come under pressure. Steady buying by domestic institutional investors (DII), on the other hand, could support the market.

Investors will also watch global bond yields and expectations on monetary policy. If yields rise again, valuations in the equity market could come under pressure and fixed-income investments would become more attractive. Conversely, if yields fall, appetite for risk could grow and investment in the stock market could get a boost.

Crude oil prices and geopolitical developments will also matter next week. If oil prices in the international market keep rising, India's import bill could increase, pressure on inflation could build and company profits could be affected. Rising geopolitical tension could also increase volatility in global financial markets.