Indian shares on track for muted open as inflation strengthens rate-hike concerns

Indian equities were poised for a muted open on Tuesday as investors monitored Middle East tensions and elevated crude oil prices, while a faster-than-expected rise in retail inflation strengthened ​the case for further interest rate hikes.

GIFT Nifty futures were at 22,423.5 at ‌7:50 a.m. IST, indicating a muted start for the Nifty 50, which closed at 22,363.35 on Monday.

India’s retail inflation accelerated to a higher-than-expected 5.54% in September, data showed on Monday, edging close to the central bank’s ​6% upper tolerance band and bolstering the case for further rate hikes as the ​Iran war and a weak monsoon add to price pressures.

“If food and ⁠energy prices remain elevated, persistent price pressures could strengthen the case for further monetary tightening ​and keep borrowing costs higher for longer,” said Hariselvan Radhakrishnan, founder and CEO of HST Wealth.

The ​Iran war, now in its eighth month, continued to keep Brent crude futures elevated around $105 per barrel. Traders assessed supply risks from attacks on Saudi Arabia while weighing the proposed additional diesel supplies from Russia.

Asian stocks ​fell more than 2% in early trading on Tuesday, with tech-heavy South Korea’s KOSPI sliding ​6%. Japan’s Nikkei sank 2.6%.

Back home, the Reserve Bank of India tightened rules on rupee non-deliverable derivative contracts, widening ‌20% ⁠cash reserve requirement to banks’ own rupee currency hedges.

The move is the latest in a slew of measures announced by the central bank since Saturday aimed at supporting the rupee, which has been falling due to steep oil prices and capital outflows.

Foreign investors net sold Indian shares ​worth 17.08 billion rupees ($178.34 ​million) on Monday, ⁠as per provisional data, marking their 12th consecutive session of selling.

They have offloaded $4.9 billion worth of shares already in October, marking the biggest monthly ​selloff since June.