• Indian stock markets are expected to open positively due to anticipated foreign inflows following a potential U.S. Federal Reserve rate cut.
• The rate cut is predicted to stimulate growth and increase spending, benefiting sectors like IT and pharmaceuticals with significant U.S. exposure.
• Both foreign and domestic investors were net buyers on Wednesday, purchasing Indian shares worth billions of rupees.
• Investors are now awaiting India's consumer inflation data, which could further influence the market.

Indian stock markets are bracing for a positive opening on Thursday, buoyed by the prospect of increased foreign inflows into domestic equities. This optimism stems from recent U.S. inflation data that has solidified expectations of a 25 basis point rate cut by the Federal Reserve.

As of 08:20 a.m. IST, the GIFT Nifty was positioned at 25,076 points, suggesting that the NSE Nifty 50 will open above its previous close of 24,918.45.

The benchmark index had shed approximately 0.5% in the previous session due to profit booking ahead of the U.S. inflation data release, which occurred after Indian market hours. The U.S. consumer price index saw a marginal increase in August, but underlying inflation remained somewhat sticky.

Global Market Reactions and Predictions

This has led to a surge in the odds of a 25-basis-point rate cut by the Federal Reserve on September 18, from 66% a day earlier to 85%. Meanwhile, the likelihood of a more aggressive 50 basis point reduction has fallen to 15% from 34%, as per CME FedWatch.

Asian markets have responded positively to these developments, with the MSCI Asia ex-Japan index rising by 1%. Wall Street equities also recorded gains overnight.

Analysts predict that Indian equities are well-positioned to capture a significant portion of inflows from the U.S. to emerging markets, following the anticipated Fed rate cut next week. This could potentially drive the markets higher. A rate cut in the U.S. is expected to stimulate growth and increase discretionary spending, which would benefit information technology and pharmaceutical companies that derive a substantial portion of their revenue from the U.S.

Investor Activity and Market Expectations

Both foreign and domestic institutional investors were net buyers on Wednesday, purchasing Indian shares worth 17.55 billion rupees ($209 million) and 2.31 billion rupees, respectively. Investors are now keenly awaiting India's consumer inflation data, which is due to be released post market hours on Thursday.

Consumer inflation is likely to have remained below the Reserve Bank of India's 4% medium-term target for a second consecutive month in August, aided by a moderation in food price rises, according to a Reuters poll of economists.