June 5 (Reuters) – Indian shares are set to open higher on Friday ahead of a key central bank policy decision, with investors awaiting signals on how it intends to tackle weakness in the rupee and inflationary pressures from elevated energy prices.
The Reserve Bank of India is likely to keep its key interest rate unchanged at 5.25%, according to a Reuters poll, but markets will watch for any shift in policy stance or measures to support the rupee after a persistent slide made it Asia’s worst-performing currency in 2026.
GIFT Nifty futures were at 23,533.50, as of 6:47 a.m. IST, indicating the benchmark Nifty 50 would open above its previous close of 23,416.55.
The central bank’s decision is scheduled for 10:00 a.m. IST.
Governor Sanjay Malhotra’s commentary will be monitored for clues on future rate actions amid mounting inflationary pressures triggered by the Middle East war.
While higher interest rates could support the rupee and ease inflation, they may also raise borrowing costs and pressure stock market valuations, making domestic equities less attractive to some foreign investors.
Rate-sensitive sectors such as financials, automobiles and real estate will be in focus.
“The surprise rate hikes in EM economies such as Indonesia, Philippines and Sri Lanka have raised hopes among a section of the market for rate hikes to defend the (rupee)… However, considering inflation will not decisively breach the 6% mark, it will not compel the RBI to hike policy rates,” said Hitesh Suvarna, macro economist at JM Financial Institutional Securities.
Brent crude futures are up 33% since the U.S.-Israeli war on Iran began in late February, while Indian stocks are set for their first annual decline in more than a decade, a Reuters poll of equity analysts found.
Higher oil prices increase the import bill and fuel inflation in India, the world’s third-largest crude importer.
These concerns have already triggered a record $28.2 billion in foreign outflows from Indian stocks so far this year.
(Reporting by Vivek Kumar M and Bharath Rajeswaran; Editing by Sonia Cheema and Sherry Jacob-Phillips)