Indian equity markets bounced back on Tuesday, snapping a six-day losing streak as cooling inflation data fueled hopes of more monetary easing. The Sensex climbed 356 points, while the Nifty reclaimed the 23,100 mark, with financials and auto stocks leading the charge.
Inflation Declines, Markets React Positively
India’s retail inflation eased to 4.3 percent in January, its lowest level in five months. That’s down from 5.2 percent in December, primarily due to falling food prices. Lower inflation tends to boost investor sentiment, as it raises expectations of potential rate cuts by the Reserve Bank of India (RBI).
However, not everyone is convinced that more rate cuts are on the horizon. “The RBI governor recently cut rates, citing a decline in January prices. However, I believe this rate cut was more of a signaling move, and I don’t expect another cut soon unless there’s a significant slowdown in India’s growth momentum,” said market veteran Sunil Subramaniam.
Sensex and Nifty Stage a Comeback
Investors shrugged off concerns over U.S. inflation and focused on domestic indicators. The market’s recovery comes after a rough patch—six consecutive losing sessions driven by disappointing Q3 earnings, foreign fund outflows, and global trade uncertainties.
At 10:25 AM, the Sensex was up 356 points (0.5%) at 76,527, while the Nifty gained 109 points (0.5%) to reach 23,154. The advance-to-decline ratio reflected bullish sentiment:
- 2,246 stocks advanced
- 963 stocks declined
- 121 stocks remained unchanged
Despite the gains, the Nifty remains 12 percent below its all-time high recorded in September.
Sector Watch: Financials and Auto Stocks Shine
Financial stocks were among the top performers, as investors bet on rate-sensitive sectors benefiting from lower inflation. Banks and NBFCs saw notable gains, while auto stocks also surged on expectations of improved consumer demand.
- HDFC Bank and ICICI Bank gained over 1 percent each.
- Maruti Suzuki and Tata Motors led the auto pack, rising 1.5 percent and 2.3 percent, respectively.
- Healthcare stocks also joined the rally, with Sun Pharma and Dr. Reddy’s climbing nearly 2 percent.
Broader Market Performance
While large-cap stocks dominated the headlines, the broader market also saw moderate gains. The BSE Midcap index edged up 0.2 percent, while the BSE Smallcap index gained 0.4 percent. However, the smallcap index is still nearly 19 percent below its record high.
One notable exception was Natco Pharma, which tanked 18 percent after reporting disappointing quarterly earnings. The stock fell to Rs 998.25, down Rs 220.55, with heavy volumes of over 5.7 million shares changing hands.
Global Factors: U.S. Inflation Casts a Shadow
While domestic inflation data was a relief, global concerns linger. A hotter-than-expected U.S. inflation print has dampened hopes of early rate cuts by the Federal Reserve, which could impact liquidity flows into emerging markets like India.
Traders remain cautious, keeping an eye on Federal Reserve commentary and upcoming economic data from major global markets.
What’s Next for Markets?
The short-term outlook will depend on several factors, including:
- Further inflation readings and RBI’s policy stance
- Corporate earnings trends for the last quarter
- Global market cues, particularly from the U.S. Federal Reserve
For now, investors are relieved to see some stability after a turbulent few weeks. Whether this rally sustains or fades remains to be seen.
