Inflation data stomps equities: Sensex slumps 610 points, Nifty sheds 220 points
Rising retail inflation exceeding the RBI's tolerance limit along with elevated crude prices triggered a sharp sell-off in equities
Indian benchmark indices Sensex and Nifty suffered significant losses as October retail inflation breached the RBI tolerance limit at 6.09 per cent, driven largely by surging food inflation and escalating weather risks. Market sentiment weakened further due to expectations that the Reserve Bank of India will raise the benchmark repo rate in upcoming policy reviews, causing all major sectors to trade in the red.
Indian benchmark indices Sensex and Nifty suffered significant losses as October retail inflation breached the RBI tolerance limit at 6.09 per cent, driven largely by surging food inflation and escalating weather risks. Market sentiment weakened further due to expectations that the Reserve Bank of India will raise the benchmark repo rate in upcoming policy reviews, causing all major sectors to trade in the red.
Indian benchmark indices Sensex and Nifty suffered significant losses as October retail inflation breached the RBI tolerance limit at 6.09 per cent, driven largely by surging food inflation and escalating weather risks. Market sentiment weakened further due to expectations that the Reserve Bank of India will raise the benchmark repo rate in upcoming policy reviews, causing all major sectors to trade in the red.
Mahindra & Mahindra, HDFC Bank, Trent, IndiGo, and BEL were the major laggards, pulling the BSE Sensex down shortly after the opening bell on Friday morning. On the Nifty, these laggards were joined by the NSE benchmark’s biggest loser in morning trade, Shriram Finance.
Despite FIIs continuing their buying streak on Thursday, rising crude prices and inflation data weakened the market resolve, as all major 16 sectors went into the red in the morning. At its lowest point in the morning in the first half hour of trading, the Sensex was down by 610 points and the Nifty by 221 points.
Multiple reports on the RBI estimated to raise the benchmark repo rate by 0.25 per cent each in its December and February monetary policy reviews due to sustained rise in inflation, added to worries.
Economists also see consumer price index (CPI)-based retail inflation above the Reserve Bank of India's upper tolerance limit of 6 per cent over the coming months in the short term.
This comes on the heels of October data, released by the Ministry of Statistics and Programme Implementation, which revealed that retail inflation rose to 6.09 per cent. This was the first time in two years that the inflation rate breached the tolerance band set for the RBI.
Food inflation led the overall retail inflation surge, bloating to 8.94 per cent in October from 7.74 per cent in September.
Weather risks added to the overall negative sentiment around food inflation. Earlier in October, RBI hiked the repo rate by 0.25 per cent to 5.50 per cent, a first in nearly four years.