Indian stock benchmarks are predicted to open higher today, buoyed by growing anticipation of an imminent rate cut by the U.S. Federal Reserve.

Gift Nifty futures were trading at 26,165 as of 08:00 a.m. IST, signaling a likely gap-up opening for the Nifty 50 above its previous close of 25,884.8. The positive sentiment is further fueled by gains in other Asian markets, which rose 0.9% following an uptick in Wall Street equities. Recent data indicating weaker-than-expected U.S. retail sales and a drop in consumer confidence have strengthened expectations for a December rate cut by the Federal Reserve.

Comments from Fed policymakers hinting towards a possible rate cut in December have further boosted market sentiment. Lower interest rates in the U.S. tend to make emerging markets like India more appealing destinations for foreign investors.

After nearing all-time highs last week, the Nifty and Sensex experienced a decline in the last three sessions due to profit booking. Currently, they are about 1.6% below the record highs reached in September 2024. Prior to this recent dip, stock investors enjoyed a steady rally since the beginning of October, supported by factors such as improving corporate earnings, record-low inflation, and stable domestic fund flows.

The Reserve Bank of India (RBI) stated in its monthly bulletin earlier this week that the government's consumption tax reductions and the central bank's rate cuts implemented this year are expected to stimulate private investment and boost overall economic growth.

India's GDP growth data for the July-September quarter is scheduled for release on Friday. A Reuters poll suggests the economy likely expanded by 7.3% during this period, following a 7.8% growth in the April-June quarter. Recent remarks by RBI Governor Sanjay Malhotra, suggesting the possibility of further rate reductions, could also provide a boost to rate-sensitive sectors in the lead-up to the central bank's policy decision next week.

On Tuesday, foreign portfolio investors (FPIs) turned net buyers of Indian stocks after experiencing two sessions of outflows, with inflows amounting to 7.85 billion rupees. Domestic institutional investors (DIIs) also made significant purchases, acquiring stocks worth 39.12 billion rupees, according to provisional data from the National Stock Exchange (NSE).

Market experts believe that a 25 basis points rate cut has already been factored into the market. A rate cut by the US Fed is generally seen as positive for riskier assets like emerging markets and commodities, potentially leading to funds moving away from safe havens in search of better returns. Sentimentally, a rate cut is also considered favorable for domestic IT and metal companies in the short term.