"It is expected that the Fed will likely increase the interest rates during its meeting slated for next week. This will not only dent the Indian rupee but all the other EM (emerging market) currencies as well."

Moreover, the FOMC decision will point to the future course of action of foreign investors, who have been on a selling spree in the Indian markets since March.

"It would be interesting to see the Fed's roadmap for the next 12 months as it will certainly influence the decisions of foreign investors. This is extremely relevant for Indian markets," Pankaj Sharma, head of equities for Equirus Securities, told IANS.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) were net sellers during the week ended December 11. They sold 3,495.29 crore or $522.98 million in equity and debt markets during December 7-11.

The data with stock exchanges showed that the FPIs sold stocks worth 1,437.46 crore in the week ended December 11.

Besides, foreign investors have taken out 23,352 crore during August-September. In November, foreign investors off-loaded stocks worth around 9,000 crore.

The silver lining on the cloudy horizon is the hope that consensus finally builds between the government and the opposition on the GST bill.

"One big hope locally is that the Congress may allow the GST bill to go through after the party's strategy of linking the National Herald case with disruption in parliament has not really been successful," Sharma cited.

Besides the GST, volatility is expected next week on account of other major events like the release of domestic inflation data points of the consumer price index (CPI) and wholesale price index (WPI).

"Investors will watch out for consumer inflation data on Monday which is expected to inch up marginally to 5.4 percent. The US will also release its core CPI data on Tuesday which could impact the markets," Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.

Furthermore, the Indian markets are expected to open Monday's trade on a positive note after domestic monthly factory output data showed robust growth, Agarwal said.

The Index of Industrial Production (IIP) data showed that India's factory output rose sharply by 9.8 percent in October, due mainly to a robust 10.6-percent growth in the manufacturing sector.

The growth had decelerated to 3.84 percent in October, and was at (-)2.7 percent last October.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), declined by 594 points or 2.31 percent to 25,044.43 points from its previous weekly close at 25,638.11 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) receded during the week under review. It ended lower by 171.45 points or 2.20 percent to 7,610.45 points.