The S&P BSE Sensex has shed around 2,700 points since July 5.

Concerns over the flight of foreign funds along with fears of further escalation in US-China trade war are expected to keep the domestic equity markets volatile during the upcoming week.

Even attractive valuations and an expected easing of the lending rate might not be enough to uplift sentiments, which are also marred by disappointing Q1 earning results and a weak monsoon, say experts.

"We may see some bounce-back, if any relief is announced on FPI (foreign portfolio investment) surcharges," said Vinod Nair, head of research at Geojit Financial Services.

The carnage at the equity indices began since July 5, when the Budget proposed a levy of an additional surcharge on individuals and trusts earning more than Rs 2 crore and Rs 5 crore, respectively.

Stock market participants fear that once implemented, this move may adversely impact FPIs which are set up as non-corporate vehicles. Typically, FPIs are set up as trusts or limited partnerships in their home jurisdictions.

The definition of a partnership firm under Indian tax law refers to the Indian Partnership Act, which does not recognise foreign partnerships or limited partnerships.

As of August 2, FPIs have been net sellers of over Rs 20,500 crore worth of stocks on the BSE, NSE and MSEI in the capital market segment, since July 1.

Consequently, the S&P BSE Sensex has shed around 2,700 points since the announcement on July 5.

Besides the direction of foreign fund flows, equity participants will keenly follow Reserve Bank's commentary on the economy.

"RBI is scheduled to meet next week and there is an expectation that the central bank will go for a rate cut," said DK Aggarwal, chairman and managing director, SMC Investments & Advisors.

Earlier, the RBI had gone for a hat-trick of rate cut on June 6, when it lowered key lending rate for commercial banks by 25 basis points (bps) to 5.75 per cent, the lowest in the past nine years.

Another key factors to look out will be the ongoing Q1 results.

Companies such as Indian Hotels, Titan Company, Cipla, HCL Tech, India Cements, Mahindra & Mahindra, Tata Steel, Voltas, Coffee Day Enterprises, NBCC (India), UltraTech Cement, GAIL (India), Hindalco Industries and Steel Authority of India are expected to announce their Q1 earning results next week.

In terms of currency, the rupee on a weekly basis weakened by 69 paise to close at 69.59 from its previous week's close of 68.90 per greenback.

"Rupee is expected to trade with a weakening bias towards 70 levels with a range of 69.30 to 70," said Sajal Gupta, head, forex and rates, Edelweiss Securities.

On technical charts, the NSE Nifty50 still remains in "oversold" territory.

"Recovery could possible only on a rise above 11,080 points. On rises above 11,080, index could head towards 11,200-11,250 in coming days as a counter trend bounce," said Deepak Jasani, head of retail research for HDFC Securities.

"Failure to do this would attract selling pressure and push down the index to further lower levels till 10,700-10,600."