Indian forex and debt investors are feeling cautiously bullish, as the countdown begins for the RBI policy review on January 29.
More gains could be in store for both next week following the government's decision to partially deregulate diesel, in what has been a welcome measure of fiscal discipline.
Traders say the 10-year bond is likely to move in a 7.75-7.85 percent range until the policy review when the central bank is widely expected to lower rates by 25 basis points.
Rupee having hit a two-and-half month high is seen meeting with stiff resistance at 53.50 levels but if inflows into shares continue, the unit may rise towards 52 next week, say dealers.
Global risk will continue to remain important, with traders awaiting the U.S. presidential inaugration on Tuesday to see if Barack Obama gives any indications on the debt ceiling resolution plans.
KEY FACTORS/EVENTS TO WATCH
Wednesday - Bi-weekly money supply data
Friday - Markets closed for a local holiday
Weekly forex reserves, bank credit data
(Reporting by Swati Bhat)