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Indian shares are set to open higher on Tuesday, tracking Asian peers ahead of a crucial U.S. inflation reading, with easing domestic inflation and hopes of potential inflows after the addition of five Indian stocks into a key MSCI index aiding sentiment.

India's GIFT Nifty was trading at 21,745.50 as of 8:29 a.m. IST, indicating that the NSE Nifty 50 will open above Monday's close of 21,616.05.

India's retail inflation fell to a three-month low of 5.10% in January, in line with the 5.09% forecast by a Reuters poll, as prices of some food items rose at a slower pace, data showed on Monday.

Industrial output rose at a faster-than-expected pace of 3.8% year-on-year in December, led by manufacturing, signalling strength in macroeconomic fundamentals.

Meanwhile index provider MSCI raised India's weightage in its Global Standard (Emerging Markets) index to a historic high of 18.2% following its February review, adding five stocks.

"The country could witness upwards of $1.2 billion FII passive inflow (after the index rejig)," Nuvama Alternative & Quantitative Research estimated.

Asian stocks opened higher ahead of U.S. inflation data, which could influence the timing of the Federal Reserve's rate cuts, with most Wall Street equities posting gains overnight. [MKTS/GLOB]

Both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net buyers of Indian equities on Monday.

FIIs bought Indian shares worth 1.27 billion rupees ($15.3 million) on a net basis on Monday, while DIIs purchased 17.12 billion rupees of shares.

STOCKS TO WATCH:

** Mahindra & Mahindra: Company's production rose 32.4% year-on-year in January 2024.

** Steel Authority of India: Company posted drop in third-quarter profit as higher imports dented sales volume.

** Coal India: Company reported a higher-than-expected third-quarter profit on higher production.

** Key earnings on Tuesday: Eicher Motors, Hindalco Industries, Zee Entertainment Enterprises.

($1 = 82.9720 Indian rupees)