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 Indian shares are set to open slightly higher on Friday, ahead of the Reserve Bank of India's policy meeting at which it is widely expected to keep interest rates unchanged.

The Gift Nifty was trading at 22,905 as of 07:40 a.m IST, indicating that the benchmark Nifty 50 will open marginally higher than its close of 22,821.40 on Thursday.

The RBI is expected to keep rates steady and retain its tighter monetary stance, as robust economic growth continues to give it space to focus on bringing down inflation towards its medium-term target of 4%. The decision is due at 10 a.m. IST.

The Nifty has gained 4.3% over the last two sessions, continuing its recovery from a steep plunge on Tuesday after Prime Minister Narendra Modi's alliance won the general elections by a surprisingly slim majority.

Despite the gains, the blue-chip index is still roughly 2% lower than its close on Monday, when it jumped to a record high as exit polls predicted a handsome victory margin for the business-friendly Modi.

However, political developments are not expected to sway the RBI's monetary policy direction or its outlook, said DBS Bank senior economist Radhika Rao, who expects the central bank to hold rates.

Nonetheless, some analysts expect the shock result will force the government to shift its policy focus to support lower-income segments, which could benefit consumer-focussed companies.

Consumer stocks have gained about 5% over the past three days, easily out-pacing other sectors. These stocks would also benefit from lower interest rates.

The RBI's stance on rates will also be key for foreign investors, who have sold Indian shares worth more than $2 billion in the past three days since the shock election outcome.

Stocks to watch:

Bajaj Finance: Housing finance unit approves IPO to raise 40 billion rupees.

RITES: Engineering firm gets order worth 396.3 million rupees.

Welspun Enterprises: Co, Indian Oil Corp agree amiably to settle suit.