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Nifty, Sensex Rise As Drop In Inflation Raises Hopes Of Monetary Easing

The broader NSE Nifty was up 0.88 per cent at 10,832.10, while the benchmark BSE Sensex rose 0.88 per cent to 36,170.63 in early trade today

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Indian shares rose today, after inflation rate plummeted to an 18-month low, raising optimism that the central bank could ease monetary policy next month, as the nation faces a manufacturing slowdown and weak growth in the farm sector.

India's annual retail price inflation declined to 2.19 per cent in December, its lowest level since June 2017, as food prices fell for a third straight month, government data showed yesterday.

The outcome was lower than the 2.33 per cent recorded in November and broadly in line with a 2.20 per cent increase forecast by economists in a Reuters poll.

The Reserve Bank of India's (RBI) Monetary Policy Committee, which mainly monitors retail inflation data and kept interest rates unchanged last month, will have a leeway to soften its monetary stance at its Feb. 7 meeting, economists said.

The broader NSE Nifty was up 0.88 per cent at 10,832.10, while the benchmark BSE Sensex rose 0.88 per cent to 36,170.63 in early trade today.

"The macro numbers are showing a deceleration. Though some market participants are probably building it in that RBI stance could change," said Dhananjay Sinha, head-Institutional Research, Economist and Strategy at Emkay Global Financial Services.

"There might be certain positivity in the market, as the data is coming on the backdrop of considerable uncertainty and a correction in the last session. However, I expect that RBI will not cut rates soon because the core inflation is still higher and the decision will rather be on the core inflation number than the headline inflation," Sinha said.

Index heavyweights such as Infosys Ltd and Reliance Industries Ltd led the gains on the Nifty, rising as much as 3.2 and 2.8 per cent, respectively. Infosys shares hit their highest since Oct. 8.

Banks also cheered the inflation relief with most of them trading in the green. Yes Bank Ltd rose nearly 5 per cent to an over eight-week high, while HDFC Bank Ltd gained up to 0.6 per cent.

IT stocks also firmed footing, with Nifty IT index rising as much as 2.3 per cent. Wipro Ltd shares advanced 3.8 per cent in their best intraday percentage gain since Dec. 13, after it said yesterday that a bonus share issue will be considered in its board meeting on Friday.

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