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Indian shares were set for a muted start on Tuesday as hawkish comments from key U.S. Federal Reserve officials weighed on investor sentiment, while sustained foreign selling ahead of the final two phases of national elections was expected to keep volatility high.

The Gift Nifty was trading at 22,592 as of 8:07 a.m. IST, indicating that the Nifty 50 will open above Saturday's close of 22,502.

Equities were flat in a special trading session on Saturday as bourse operators tested a failsafe system for equity trading.

Volatility in Indian markets remains at 20.53, just shy of 19-month high of 20.6 hit on May 13.

Foreign investors have sold Indian shares worth 282.42 billion rupees (nearly $3.5 billion) in May so far, the highest in 16 months since January 2023.

Sustained foreign selling is driven by relatively high valuations in Indian equities compared to other emerging market peers like China, as well as caution ahead of national election results on June 4. However, domestic institutional investors have been net buyers in 19 of the last 20 sessions, lending stability to markets.

Meanwhile, Asian peers opened lower on the day, with the MSCI Asia outside Japan shedding 0.87%. Overnight, Wall Street equities were mixed as hawkish comments from Fed officials weighed on sentiment.

STOCKS TO WATCH:

** Oil and Natural Gas Ltd (ONGC): State-run explorer beat fourth-quarter profit estimates on Monday, boosted by higher prices and sustained fuel demand.

** Dr. Reddy's Laboratories: Local media reports that the drugmaker is recalling its Javygator Powder for Oral Solution due to it being a "sub-potent drug" as stated by U.S. FDA.

** Biocon: Drugmaker said its unit received U.S. FDA's approval for its eye drug and entered the U.S. opthalmology market.

($1 = 83.3210 Indian rupees)