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Indian shares are set to open little changed on Thursday, ahead of the Reserve Bank of India's monetary policy decision, where the central bank is widely seen holding key rates steady.

India's GIFT Nifty on the NSE International Exchange was down 0.07% at 19,597.50, as of 7:52 a.m. IST.

The RBI's rate decision will be announced at 10:00 a.m. IST.

While the central bank is widely expected to hold benchmark rates steady, the degree of hawkishness in its commentary, given the expected rise in inflation, is key for the markets.

"The policy will likely note an increase in headline inflation pressures even though core inflation remains steady," economists Upasana Chachra and Bani Gambhir of Morgan Stanley wrote in a note.

A Reuters poll shows India's retail inflation likely accelerated to 6.40% in July due to surging food prices, breaching the upper end of the RBI's 2%-6% tolerance band for the first time in five months.

Morgan Stanley analysts expect the RBI will start cutting rates only from the first quarter of calendar 2024.

The pause in rate hikes so far this fiscal year, after an increase of 250 basis points in fiscal 2023, has helped the benchmark Nifty 50 jump 13.09% since April and hit all-time highs.

Wall Street equities closed lower overnight ahead of the U.S. inflation data due after the close of Indian markets on Thursday. The data will give investors further cues on when the U.S. might cut rates.

Asian markets fell on the day, dragged by rising concerns over China's economy. [MKTS/GLOB]

Foreign institutional investors (FIIs) snapped an eight-session selling streak in Indian equities on Wednesday.

FIIs bought 6.44 billion rupees ($77.74 million) worth of shares on a net basis, while domestic institutional investors (DIIs) sold shares worth 5.98 billion rupees, according to provisional data from the National Stock Exchange (NSE).

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** Axis Bank: Private lender approves plan to raise stake in Max Life through 16.12 billion rupee investment.

($1 = 82.8380 Indian rupees)