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India's stock benchmarks are set to open higher on Friday, with investors divided over the Reserve Bank of India's policy decision as strong economic growth and a weakening rupee cloud the case for a rate cut.

Gift Nifty futures were trading at 26,184.5 points as of 6:55 a.m. IST, indicating that the benchmark Nifty 50 will open above Thursday's close of 26,033.75.

The RBI's decision is due at 10:00 a.m. IST. A Reuters poll had forecast a 25-basis-point cut in the policy repo rate ahead of GDP data released last month.

India's economy grew at its fastest pace in 18 months in the September quarter, lifted by robust consumer spending, while retail inflation slumped to a record low in October.

Expectations of a rate cut eased after the better-than-expected growth data and the recent slide in the rupee.

"The monetary policy decision and commentary will be crucial, especially for rate-sensitive banks as rate cut probability has reduced post the robust growth data," said Vinod Nair, head of research of Geojit Investments.

However, some analysts said that a rate reduction could spur a short-term rally, especially as demand momentum has already been aided by the recent tax cuts.

The rupee has slipped to fresh lows against the dollar in recent sessions amid a wider trade gap, weak capital inflows, stalled U.S.-India trade talks and continued foreign selling in local equities.

"The sharp drop in the rupee in the last few days could only persuade the central bank in favour of policy caution," said Santanu Chakrabarti, analyst at BNP Paribas Securities.

Both the Nifty and Sensex have dropped 0.7% and 0.5%, respectively, so far this week, as investors awaited the RBI's rate decision and commentary.

The benchmarks are up 10.1% and 9.1% in 2025, with brokerages projecting gains of 10%-15% by the end of 2026. The indexes have seen some profit booking in recent sessions after they hit record highs for the first time in 14 months last week.