Stock Market begins day on upbeat note as inflation eases
The key stock indices made history again on Thursday as both Sensex and Nifty scaled new peaks driven by positive inflation data. The 30-share BSE Sensex gained nearly 500 points to breach the 77,000 mark for the first time ever. The broader 50-share Nifty index climbed over 150 points to surpass the 23,400 level.
Inflation numbers released lately have brought cheers to investors and traders. The retail inflation in India slowed to a year-low of 4.75% in May prompting hopes of an interest rate cut by the Reserve Bank later this year. Even in the US, consumer prices rose at a softer pace than expected last month reinforcing views that the Federal Reserve may go slow on further rate hikes.
The latest inflation prints indicate prices are stabilizing which allows central banks to assess the actual growth-inflation dynamics better. This can translate to accommodative monetary policies going forward and continue fueling the ongoing rally in stock markets. Sentiments were also boosted after the Fed retained rates while signalling a less hawkish stance.
The decline in inflation has increased possibilities of the RBI joining other central banks in easing monetary policy in coming months. Banking stocks were in high demand on expectations that interest rate cuts may boost credit growth and lower bad loans. The optimism was visible as almost all leading sectors opened with decent gains and defended the early momentum throughout the morning session.
Overall, the positive cues on inflation are a relief for market participants who now feel major central banks can focus more on reviving growth without immediate threats to price rise. The ongoing stock market rally is expected to continue as long as inflation remains well anchored and financial conditions supportive.
