Domestic stock markets are expected to open lower on Wednesday ahead of the US Federal Reserve’s decision on interest rate hike.

According to Emkay Global, repricing of the Fed since the Jackson Hole (JH) conference and the searing August inflation print imply that markets now expect over 70 bps rate hike.

"A 75 bps hike is sealed in this week's FOMC, but a 100 bps hike is not being ruled out. The guidance/dot plot is likely to tighten even more, if Fed delivers a hike of 75 bps vs 100 bps," it added.

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Mitul Shah-Head of Research at Reliance Securities, said: "While both the US Fed and the Reserve Bank of India have taken a hawkish stance in their fight against inflation, macroeconomic uncertainties are going to influence the market going ahead."

Meanwhile, SGX Nifty indicates that Nifty 50 is likely to open 100 points lower. Most equities across Asia Pacific region have opened with a negative bias on Wednesday by 0.3-1.5 per cent. Australian stocks are the worst among them by falling nearly 1.5 per cent.

Betting on India’s growth story

Analysts, however, pointed out that institutional investors are finding Indian stocks attractive due to the relative strength of the economy.

Relief rally continued for the second straight session indicates that investors are finding local stocks attractive after every short-term correction, said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd

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"Even as there are talks of global recession at some point, the Indian economy is holding up really well in times of uncertainty, which is prompting investors to bet on our growth story," he added.

According to Shah, India is trading at a premium compared to emerging markets on high growth expectations. "We expect the outperformance to continue given the FII investments and strong macros for the Indian economy. We also expect strong economic rebound and better visibility in the near-term," he added.