Market week ahead: Industrial output key

Domestically, the industrial production data on Thursday will be key, though it won't be a major market mover unless the number is a big negative or positive surprise given its volatile nature.

The summer drought is also weighing on sentiment, sparking worries it could hit rural consumption and delay any potential fiscal measures from the government, such as a hike in diesel prices.

Worries the RBI will delay cuts in interest rates could also weigh after the central bank kept rates on hold on July 31.

The benchmark 10-year bond yield is seen trading in a 8.22-8.32% range for the week.

The rupee is expected to hold in a 55 to 56/dollar range, though global risk factors will be key.

Traders see the rupee strengthening towards 54.50 if hopes for QE3 from the Fed grow.