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Indian shares are set to open lower on Wednesday ahead of an expected central bank rate hike as persistent inflationary pressures from war in the Middle East force rate-setters' hands globally.

GIFT Nifty futures were at 22,704.5, as of 7:42 a.m. IST, pointing to a lower open for the benchmark Nifty 50, which closed at 22,776.1 on Tuesday.

The Reserve Bank of India is widely expected to raise rates by 25 basis points, its first increase since February 2023, with Governor Sanjay Malhotra's comments on inflation risks to be closely watched by investors for signals on the future rate path.

"The monetary policy committee may also shift its stance from neutral to calibrated tightening or withdrawal of accommodation," said analysts at Goldman Sachs led by Santanu Sengupta.

Since the RBI's rate pause on August 5, the benchmark Nifty 50 has dropped 7.5%, dragged by higher oil prices, rising US bond yields on inflationary worries and foreign outflows from Indian equities.

"While a 25-basis-point rate hike appears inevitable in the context of rising inflationary pressures and bond yields, it is important to understand that a rate hike would be beneficial for the banks whose margins will improve from rising floating rates," said VK Vijayakumar, chief investment strategist at Geojit Investments.

A potential rate hike would pressure non-bank lenders' margins as funding costs reprice faster than loan yields, especially for fixed-rate vehicle and microfinance lenders, while floating-rate housing financiers are relatively better positioned, JM Financial said.

Other rate-sensitive sectors, including real estate and consumer companies, could also see their earnings outlook influenced by the RBI's assessment of inflation and growth, three analysts said.

Brent crude rose about 1% to $101.5 as storm risks to US oil output and Houthi attacks on Saudi Arabia outweighed increased Middle East supply.[O/R]

Asian markets were muted after Wall Street equities rose overnight, with the S&P 500 and Nasdaq hitting record highs as easing US yields reduced expectations of a near-term Federal Reserve rate hike.

STOCKS TO WATCH

** Titan Company says quarterly consumer business sales grew 25% year-on-year in the September quarter, driven by demand for jewellery, watches and eyewear

** Utkarsh Small Finance Bank's total deposits rise 6.6% Y/Y in the second quarter; total disbursements up 54.9%

** Asset Reconstruction Company reports a 54.2% Y/Y rise in consolidated net profit for the June quarter

** Mphasis secures 35.4 million euros contract from Social Security Scotland

($1 = 96.3900 Indian rupees)