Equity markets will respond positively to the BJP's big wins in Madhya Pradesh, Rajasthan and Chhattisgarh assembly polls, as a stable political environment could further boost investors' confidence and drive stocks higher, analysts said.

Besides the state elections outcome, global trends, trading activity of foreign investors, and RBI's interest rate decision are the other major factors that will drive the movement in the domestic equity markets this week, they added.

The BJP was set to form the government in the Hindi heartland states of Rajasthan and Chhattisgarh while retaining power in Madhya Pradesh with an emphatic win, according to counting of votes on Sunday. In Telangana, the Congress was set to form the government.

"A new bull phase with a clear support for growth awaits the market following a strong mandate for the ruling party at the Centre in 3 out of 5 state poll results. A stable political environment could further boost investors' confidence and drive the markets higher, with the possibility of benchmark Nifty attaining 20,500-20,800 levels going ahead appears bright," said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

Optimistic global trends including signs of foreign investors making a comeback in domestic markets are the major factors that will drive the upward movement going forward, he said.

V K Vijayakumar, Chief Investment Strategiest, Geojit Financial Services, said on Sunday, "If the state elections can be treated as semi-final, then the indications are that the final will be an outright victory for the BJP." "The results have surpassed the ruling dispensation's most optimistic expectations with a landslide win in MP and seizing power from the Congress in Rajasthan and Chhattisgarh. Clearly, it is advantage BJP. Markets like political stability and market-friendly reform-oriented government. BJP is the party that can deliver this now. Therefore, the markets will respond positively," Vijayakumar added.

Markets are likely to celebrate with big gains, Sunil Nyati, Managing Director, Swastika Investmart Ltd, said on BJP registering big wins in Madhya Pradesh, Rajasthan and Chhattisgarh.

From the macroeconomic data front, PMI (Purchasing Managers' Index) data for the services sector will be announced on Tuesday. RBI's interest rate decision will be announced on Friday.

"Global markets are currently in a fabulous mood. The US 10-year bond yield and the dollar index are also cooling off, which gives strength to the market. These factors will be closely monitored, as they have the potential to influence market sentiment," said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

Domestic and global macroeconomic data, trends in global stock markets, the movement of the rupee against the dollar, and crude oil will also dictate trends, he added.

"Markets will react to domestic and global macroeconomic data, global bond yields, crude oil inventories, movement of the dollar index, Foreign Institutional Investors (FII) and domestic institutional investors' investment activities.

"Upcoming events this week will impact the market such as S&P services PMI data for major economies like India, the USA and the UK, the US initial jobless claims, employment rate, non-farm payrolls and India's interest rate decision," Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said.

Last week, the BSE benchmark jumped 1,511.15 points or 2.29 per cent, while the Nifty climbed 473.2 points or 2.39 per cent.

On Friday, the Nifty climbed 134.75 points or 0.67 per cent to settle at an all-time high of 20,267.90. During the day, the benchmark reached its intra-day record high of 20,291.55.

The market capitalisation of listed companies on the NSE has surpassed the USD 4 trillion (Rs 334.72 trillion) mark for the first time ever on Friday.

The combined market valuation of all listed companies on the BSE also reached the USD 4 trillion-milestone for the first time ever on Wednesday (November 29).

"Frenzied buying on the back of renewed optimism from FIIs and positive European market cues lifted the benchmark Nifty to a fresh record high.

"India remains a bright spot in an uncertain global economy as the recent data indicators such as strong GDP and manufacturing numbers along with external factors like falling US bond yields are keeping markets in good stead," Tapse of Mehta Equities Ltd had said on Friday.

Favourable macroeconomic data and continuous foreign fund inflows were the major drivers behind markets' rally last week.

"This week, investors' attention will mostly be directed towards the release of services PMI data from the US, India, and China. Also, the RBI policy meeting. The gradual return of FIIs in November signals positive momentum to continue," said Vinod Nair, Head of Research, Geojit Financial Services.