Equity markets will be driven by the outcome of the US Federal Reserve's interest rate decision this week, analysts said.

Moreover, equity benchmarks will also continue to be guided by foreign fund movement and trend in Brent crude oil, they added.

"The global markets are looking nervous after the US inflation numbers, which have caused the dollar index to hover around 110," said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Now everyone is eyeing the outcome of the upcoming US Federal Open Market Committee (FOMC) meeting. The Bank of England will also announce its interest rate decision, Meena said.

He further added that institutional flows will play a critical role because foreign investors have turned sellers in the Indian equity market.

"In absence of any major domestic data and events, participants will be closely eyeing the US Fed meet. Besides, the trend of foreign flow would also remain on their radar," Ajit Mishra, VP Research, Religare Broking Ltd, said.

Last week, the Sensex shed 952.35 points or 1.59 per cent, while the Nifty fell 302.50 points or 1.69 per cent.

The 30-share BSE Sensex had tanked 1,093.22 points or 1.82 per cent to settle at 58,840.79 on Friday, mirroring a sell-off in global markets.

Despite its strong decoupling scenario and encouraging macroeconomic data, domestic bourses succumbed to the global trend of rising bond yields and the dollar index as a result of rate hike fears in the global market, said Vinod Nair, Head of Research at Geojit Financial Services.

Apurva Sheth, Head of Market Perspectives, Samco Securities, said, "The FOMC meeting and press conference will be the centre of attention this week. Globally, Fed's interest rate decision can trigger jitters in the markets. Although India has done significantly better than all the other major markets, it is expected to remain volatile."