Indian shares likely to open higher; caution about Fed decision to cap gains

India’s equity benchmarks are likely to open higher on Monday, extending the previous session’s gains after the central bank lowered interest rates and boosted liquidity in the banking sector.

However, the gains are expected to be capped by caution ahead of the U.S. Federal Reserve’s policy decision later this week, where the central bank of the world’s largest economy is expected to cut rates.

The Gift Nifty futures were trading at 26,321.5 points as of 7:47 a.m. IST, indicating that the benchmark Nifty 50 will open above Friday’s close of 26,186.45.

The 50-stock index gained 0.6% on Friday after the Reserve Bank of India lowered interest rates by 25 points and took steps to boost banking-sector liquidity by up to $16 billion to support a “goldilocks” economy.

Domestic institutional investors bought shares worth 41.89 billion rupees ($465.79 million) on Friday, while foreign investors sold $48.81 million of shares, as per provisional data.

Asian shares dithered on Monday as investors bet on a rate cut from the Fed later this week, yet the meeting could be one of the most fractious in recent memory, with some policy makers openly arguing against an easing.