Indian benchmark indices Sensex and Nifty are likely to open on a mildly positive note on Tuesday, with GIFT Nifty signalling gains despite a sharp selloff across Asian markets. However, India's higher-than-expected retail inflation, elevated crude oil prices and escalating Middle East tensions could weigh on sentiment. Expectations of further RBI interest-rate hikes also add to concerns over the domestic outlook.
GIFT Nifty was trading at 22,425 around 8 am, up 55 points, or 0.25 percent. Indian equities ended sharply lower on Monday, with the Sensex falling 547.65 points, or 0.76 percent, to 71,924.68 and the Nifty declining 157.10 points, or 0.70 percent, to 22,363.35. Foreign institutional investors remained net sellers, offloading equities worth Rs 1,700 crore, while domestic institutions bought shares worth more than Rs 3,000 crore.
India's retail inflation accelerated to a higher-than-expected 5.54 percent in September, moving closer to the Reserve Bank of India's upper tolerance limit of 6 percent and strengthening expectations of further interest-rate hikes. The increase comes amid sustained pressure from elevated crude oil prices and a weak monsoon, with the Iran war, now in its eighth month, continuing to disrupt energy supplies and fuel inflation concerns.
The inflation reading follows the RBI's decision earlier this month to raise the repo rate by 25 basis points to 5.50 percent, its first increase since February 2023, and shift its policy stance to calibrated tightening. The combination of higher inflation and tighter monetary conditions could add to pressure on rate-sensitive sectors.
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