June 5 (Reuters) - Indian shares inched higher on Friday ahead of a key central bank policy decision, with investors awaiting signals on how it intends to tackle weakness in the rupee and inflationary pressures from elevated energy prices.
The Reserve Bank of India is likely to keep its key interest rate unchanged at 5.25%, according to a Reuters poll, but markets will watch for any shift in policy stance or measures to support the rupee after a persistent slide made it Asia's worst-performing currency in 2026.
The benchmark Nifty 50 was up 0.19% at 23,460.50, while the BSE Sensex gained 0.24% to 74,539.75, as of 9:33 a.m. IST.
Twelve of 16 major sectors logged gains. The broader small-caps and mid-caps rose 0.2% and 0.5%, respectively.
The central bank's decision is scheduled for 10:00 a.m. IST.
Governor Sanjay Malhotra's commentary will be monitored for clues on future rate actions amid mounting inflationary pressures triggered by the Middle East war.
Since the start of the Iran war, the Nifty 50 and Sensex have fallen about 7% and 8%, respectively, as the conflict has driven a 32% surge in oil prices, record foreign outflows from domestic markets, and pushed the rupee to all-time lows.
The turmoil has intensified concerns over economic growth and inflation, compounded by fears of a deficient monsoon.
"We expect the central bank to announce capital-flow related measures at this meeting. Elevated short-term domestic funding rates, driven by liquidity constraints, could encourage more dollar issuance by quasi-sovereigns, corporates and banks," said Goldman Sachs analysts led by Santanu Sengupta.
While media reports have suggested a potential tax relief for foreign investors in bonds, including a lower withholding tax, such changes would require coordination with the finance ministry and other regulators, Sengupta said.
Among individual stocks, Rajesh Exports fell another 5%, extending Thursday's 5% loss, after the markets regulator alleged the jeweller had inflated revenue through unverified overseas entities. The company has denied the allegations.
(Reporting by Vivek Kumar M and Bharath Rajeswaran; Editing by Sonia Cheema and Sherry Jacob-Phillips)
By Bharath Rajeswaran and Vivek Kumar M
