Sensex, Nifty expected to open higher as soft US data lifts rate cut bets

Indian shares are set to open higher on Wednesday, tracking other Asian peers, after softer U.S. producer prices data reinforced bets of an interest rate cut by the Federal Reserve in September.

The Gift Nifty was trading at 24,195, as of 8:06 a.m. IST, indicating that the NSE Nifty 50 will open above its Tuesday’s close of 24,139.

Asian markets rose, with the MSCI Asia ex-Japan index adding 0.5%. Wall Street equities closed higher overnight after data showed that U.S. producer prices rose less than expected in July, signalling cooling inflation.

Traders see about a 53% chance of a 50-basis-point Fed rate cut in September, rising from 50% a day before, according to CME FedWatch Tool.

The U.S. consumer price data for July, due after Indian market hours, is the next major data point that investors will closely watch.

Indian benchmarks Nifty 50 and S&P BSE Sensex fell in the previous session, dragged by HDFC Bank and broad-based selling pressure.

Analysts expect volatility to rise in the Indian market over the next few sessions on U.S. data and geopolitical developments in the Middle East. They also expect bouts of profit-booking due to high valuations.

“While India offers superior quality in terms of return on equity, compared to other emerging markets, this variable on its own cannot justify the current valuation premium,” said Aditya Suresh and Suresh Ganapathy of Macquarie Capital Securities.

On the day, information technology companies, which earn a significant share of their revenue from the U.S., could rise on the favourable producer prices data.

Reliance Industries will also be in focus after the oil-to-telecom conglomerate and Walt Disney offered to sell some channels to win faster antitrust approval for their $8.5 billion India media assets merger, Reuters reported on Tuesday.