The domestic market is expected to open weak on Monday, as selling by foreign portfolio investors continues unabated on the back of global and domestic headwinds.

According to analysts, the market will likely see any major recovery until the Budget. With this week being curtailed one (holiday on January 26) and monthly settlement of January F&O contracts on the NSE on January 27, the domestic market is likely to see higher volatility, they added. The Q3 results announced by India Inc are mixed, said market experts.

All eyes on Fed meet

The focus will be on the US Federal Reserve’s meeting on Tuesday and Wednesday. Investors across the globe expect a clear signal from the central bank on its plan on interest rate hikes. Besides, its commentary on inflation and growth outlook of the US as well as global markets will also be keenly watched.

Five days of consecutive weak trends in the US has impacted market sentiments. This might have influenced FPIs decision to sell in India, which they consider over-valued, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, and added: "FPI investment behavior has become highly volatile and inconsistent."

However, analysts said index heavyweights Reliance Industries and ICICI Bank came out with a fabulous set of numbers. This will help index fallmuch from current levels and aid strong recovery when the overall direction changes.

FPI action, Q3 nos to drive market

According to Vinod Nair, Head of Research at Geojit Financial Services, continued FII selling and patchy corporate earnings along with surging covid cases globally were key factors driving the domestic market.

SGX NIfty at 17540 (8am IST) indicates that Nifty is likely to see a gap down opening with 70 points as Nifty futures on Friday closed at 17,617. While major Asia-Pacific stocks are down around 0.5-0.6 per cent, Korea's Kospi tumbled sharply 1.6 per cent.

Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities, It is the global phenomenon that is driving the sentiment in local stocks as investors are concerned that a rate hike by the US Fed could further precipitate the already weak sentiment. "While rising inflation is already giving jitters to the market, to make matters worse oil prices too have been on an upward march in recent sessions which is putting investors on the backfoot," he added.

According to Dr Vijayakumar:, "There are no expectations from the budget as far as Foreign Portfolio Investment is concerned. But some announcements regarding the inclusion of India in the global bond index is expected."