Indian Shares Set to Open Higher on Cooling Inflation, Awaiting US Data and Fed’s Rate Decision
Key Highlights :
Indian shares are set to open slightly higher on Tuesday as domestic retail inflation cooled to a more than two-year low in May. Investors are awaiting US inflation data and the Federal Reserve’s rate decision, which will be announced on Wednesday.
Wall Street equities closed higher on Monday, aiding risk sentiment ahead of the US inflation data and the Fed’s policy decision. The odds of a rate pause stood at 80.4%. Asian markets edged higher, while oil prices recovered some ground after a slide on Monday on global demand concerns.
India’s annual inflation eased to a more than two-year low of 4.25% in May, aided by a further fall in food inflation. Industrial output rose 4.2% year-on-year in April, above the estimated 1.8% expansion. Economists said cooling inflation and rising production vindicated the central bank’s decision to hold rates as well as the monetary policy stance.
Indian shares rose on Monday, ahead of the release of the macroeconomic data. Both the Nifty 50 and Sensex were 2% below all-time high levels. Analysts expected markets to witness consolidation ahead of key central bank decisions from Bank of Japan and European Central Bank, besides the Fed.
Foreign institutional investors sold 6.27 billion rupees ($76 million) worth of Indian equities on a net basis on Monday, while domestic investors bought 17.94 billion rupees of shares, as per provisional NSE data.
The Indian markets are expected to remain volatile in the near-term as investors await key central bank decisions from the US Federal Reserve, Bank of Japan, and European Central Bank. Investors will also be closely monitoring the US inflation data, which will be released on Tuesday, to gauge the impact on the Fed’s rate decision.
In the long-term, analysts remain bullish on the Indian markets, citing the country’s strong macroeconomic fundamentals and the government’s reform measures. The recent cooling of inflation and the uptick in industrial production are expected to provide a further boost to the markets.
Overall, Indian shares are set to open slightly higher on Tuesday on improved sentiment after data showed domestic retail inflation cooled to a more than two-year low in May, while investors await US inflation data and Federal Reserve’s rate decision.
