Indian shares seen lower as oil stays near six-month high, Fed in focus

Indian stocks are anticipated to commence the day on a downward trajectory on Tuesday, erasing a portion of the previous session's gains, as Brent crude prices hover around $115 per barrel and market participants remain cautious in anticipation of the US Federal Reserve's policy decision later in the week. Nifty futures stood at 22,669.5 at 7:53 a.m. IST on Tuesday morning, suggesting a bearish opening for the Nifty 50 index, which ended Monday at 22,753.2.

The Nifty 50 and BSE Sensex had risen by 0.7% on Monday, breaking a four-day losing streak, propelled by post-earnings gains in select shares. Brent crude futures have been hovering near a six-month peak following attacks on Saudi Arabia, which has dampened hopes for an immediate alleviation of tensions in the region. Increased oil prices pose a significant challenge for India, as they lead to higher inflation, a larger fiscal deficit, and reduced corporate profits due to India's heavy reliance on importing energy.

The US Federal Reserve is likely to maintain interest rates steady on Wednesday, followed by a resumption of its tightening cycle with a rate hike in December, according to a Reuters poll of economists. Hariselvan Radhakrishnan, founder and CEO of HST Wealth, stated that a hawkish signal from the Fed could boost yields and the dollar, potentially hampering emerging-market flows.

Conversely, balanced guidance from the Fed might enable the recent equity recovery to expand. Foreign investors offloaded Indian shares valued at 14.62 billion rupees ($153.60 million) on Monday, with a cumulative outflow of $4.75 billion in October and a record $32.56 billion in 2026. While Asian stocks climbed by more than 1%, driven by a surge in AI-linked stocks, India's limited exposure to AI has been a major factor behind the record foreign selloff and the Nifty 50's underperformance relative to its emerging market counterparts.