Additionally, higher crude oil price as well as premium valuations coupled with escalation in trade war and upcoming full-fiscal Budget for 2019-20 will make investors cautious, experts said.
"The short-term headwind for the domestic market is the high expectation on the full budget post the interim budget published in February-2019," Geojit Financial Services Head of Research Vinod Nair, told .
"The government will have to follow the fiscal prudence given the shortfall in financial revenue. It will be a challenge to match this expectation but government may have to stretch the fiscal target in the short-term, which is the need of the hour."
According to Shiv Diwan, co-head, institutional equities, Edelweiss Securities: "This seems to be a phase of consolidation, and could continue for longer given that economic momentum still remains soft."
"However, it is being compensated by lower interest rates both domestic and international. Going ahead, NBFC crisis and India's high frequency growth indicators will be keenly watched."
Another trigger for volatility will be India's decision to enter the trade war by imposing retaliatory tariffs on US imports. Industry estimates have pegged $290 million worth of additional burden on US items exported to India.
Last year, the US imposed duties on steel and aluminium from India and more recently, the Trump administration ended the preferential treatment given to various goods supplied from India. The withdrawal of generalized system of preferences or GSP benefits came into effect from June 5. These non-reciprocal and non-discriminatory export benefits are extended by developed countries to developing countries.
Besides fears over an escalation of trade war, the movement of Indian rupee against the US dollar and the direction of foreign fund flows will also set the course for the key indices.
In terms of currency, the Indian rupee weakened 33 paise to 69.81 against the US dollar from its previous close of 69.48.
"Expect rupee to be under pressure next week with a likely range of 69.50 to 70.50," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
On technical levels, the NSE Nifty remains in an intermediate uptrend.
"Technically, the Nifty remains in an intermediate uptrend and traders will need to watch if the index can now hold above the immediate supports of 11,769-11,680 for the uptrend to sustain in the coming week," said HDFC Securities Retail Research Head Deepak Jasani.
(Rohit Vaid can be contacted at rohit.v@.in)
( With inputs from IANS )