India’s equity markets are set to open higher on Friday as traders anticipate the Reserve Bank of India’s (RBI) upcoming policy decision. The central bank’s announcement, scheduled for 0400 GMT (2300 US Eastern time), comes amid uncertainty over whether a rate cut will be implemented.

Nifty futures were trading above Thursday’s close, reflecting cautious optimism. Earlier expectations suggested the RBI would reduce rates by 25 basis points, according to a Reuters poll. However, stronger-than-expected GDP growth and the recent sharp depreciation of the rupee have tempered these expectations.

The rupee’s decline to new lows has been driven by weak capital inflows, an expanded trade deficit, and stalled trade negotiations between the U.S. and India. Analysts warn that these factors may prompt the RBI to adopt a more cautious stance, potentially delaying any rate easing in the near term.

Despite this, some strategists believe that a rate cut could trigger a short-term rally, especially since recent tax cuts have already supported demand. Both the Nifty and the Sensex have slipped modestly over the week as investors await the RBI’s announcement. Nonetheless, both indices remain approximately 10% higher year-to-date and are projected to gain between 10% and 15% through 2026, even after recent profit-taking following 14-month highs.

It is important to note that the rupee’s steep decline has negatively affected offshore investors holding Indian equities, adding another layer of complexity to market dynamics.

Original Source: Eamonn Sheridan of investinglive.com