Equity markets will focus on macroeconomic data as well as government measures to support growth and address tax issues in the holiday-shortened week ahead, analysts said.
Bourses would remain closed on Monday and Thursday for Bakri Id and Independence Day, respectively.
"Going ahead investors will closely monitor government measures on supporting growth and FPIs tax issues," said Vinod Nair, Head Of Research at Geojit Financial Services.
Markets may on Tuesday react to industrial production numbers released post market hours on Friday.
India's industrial production growth slipped to a four-month low of 2 per cent in June, mainly due to poor performance of mining and manufacturing sectors, official data showed.
"Although investors sentiment would continue to drive volatility in the stock market, the focus should be on how the government would tackle the tepid demand environment that suggests cyclical slowdown. As government measures to support growth plays out, we could see economy back on track of its long-term growth story," said Arun Thukral, MD and CEO, Axis Securities.
According to Mustafa Nadeem, CEO, Epic Research, with the shortened week ahead, the market is also awaiting inflation data that will be released. So, volatility may continue to hurt while the overall trend is still bearish in the short-term. It is important to see if this rebound can sustain amid domestic and global headwinds, he added.
During the last week, the Sensex gained 463.69 points or 1.24 per cent.
Hopes of measures from the government to ease the tax burden on FPIs and jump-start the sluggish economy had propelled the markets on Thursday and Friday. The 30-share Sensex had gained 891.41 points in the two sessions.
"Markets will see speculative swings given that there are no important events ahead be it local or global factors," said Jimeet Modi, Founder and CEO, SAMCO Securities & StockNote.
Market sentiment would also be guided by movement of rupee, oil prices and investment trend by overseas investors.