Riding high on frantic buying by foreign funds, the benchmark Sensex posted gains for the fifth consecutive week and settled almost 371 points higher at an over three-month peak of 17,604.96 in the last trading session on Friday.

"Markets will be in a euphoric state this week as the triggers are at present positive. Encouraging US jobs data, renewed buying interest from FIIs will push the markets higher. However, fag-end of the week may see profit booking by investors. Also, movement on crude oil should be watched closely and is a crucial factor in dictating the market trend," Ashika Stock Brokers Research Head Paras Bothra said.

Marketmen also said rupee appreciation has been a positive development for the stock market. It continued to move higher against the US dollar in the past week on the back of strong fund inflows.

The unemployment rate in the US dropped to 8.3 per cent in January with the addition of more than 2.4 lakh jobs.

FIIs, the big movers of the market, picked up shares worth over Rs 5,850 crore last week, as per market data, including provisional data for February 3, infusing a total Rs 15,230.30 crore in the current calender year till February 2.

"The start of the new year augured well for the markets, with global equities starting off on a strong note. This was largely due to expectations of a solution to the euro zone debt crisis and upbeat economic data from the US," Kotak Securities Managing Director D Kannan said.

"Back home, strong rally was seen in the market due to the revival in FII flows, softening of WPI inflation and the RBI cutting the CRR. The Q3, FY'12, results declared so far have also been largely in line with expectations," he added.

Kannan further added that continued risk appetite in global markets could lead to higher FII flows. The factors to watch for are developments in Europe as well as geo-political developments related to Iran, he said.

In India, Assembly election results and the Union Budget will be the crucial events that will give further direction to the market, he said.